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Article Written for MovieMaker's "Beginner's Guide to Making Movies"
Indie Features: Financing & The Everest Climb
by Action/Cut Instructor & Seminar Founder Guy Magar

Soooo…you want to make a feature film and are committed to making it happen whatever it takes? Good for you. Ready to climb Mount Everest?

Can it really be this difficult? From my experience and everyone else’s I know who has done it, yes! Raising private financing for a film is the Everest climb for every indie filmmaker. Many potentially great filmmakers never completed the ascent while many did reach the summit, but few had the visual-storytelling talent to make a memorable film, thus the hundreds of indie features per year that never get distribution or return a dollar of their investment. To climb Everest, you need great passion to fuel your commitment, previous work to hone your talent to its best, tremendous self-motivating perseverance to search and find needed funds, lots of good luck, and this article info!

Facts: The film industry is focused on mass entertainment to the tune of $12 billion dollars yearly! The two marketing variables? The stars…which is why they are paid ungodly sums and treated inanely like royalty - The directors…will most folks go see the next Spielberg or Cameron film? You betcha. Is it all still a huge multi-million dollar gamble? Yup, just ask the financiers of GIGLI or the majority of studio films yearly. How do they survive the losses? They all make sure to have a tent-pole movie or two…a blockbuster summer sequel. Results: if a studio has a bad year, heads roll and new blood of “guessers” are brought in, thus the cutthroat, musical chairs, executive game. If a studio has a good year, everyone’s salary goes up and finds a new Porsche in their driveway.

In that “wonderful” closed world to which so many want membership, what about the indies? Well, we got no dough for star actors or directors! So how do we get money to make our movies? First and most importantly, how to get there and have a chance at making something good. The true independents are the short filmmakers. To everyone out there with a DV camera and a home editing system…hallelujah! You’re lucky as you are the first generation of filmmakers with access to these new technologies at affordable home pricing.

From fiction to docs, they make their no-budget films whenever an idea inspires them, and new amazing software is keeping short film animators glued to their computers. As digital guru Scott Billups
states in his defining book Digital Moviemaking “the democratization of filmmaking has arrived.” 

But is there a market for shorts? Small and usually non-profit making to the filmmaker. But there are festivals and competitions and websites devoted to short films where they can compete and win monetary prizes, sponsor awards, and most importantly get exposure and recognition of their work which can open doors and push them along to their next film. It is a real good idea for anyone making a first feature film to have a number of shorts under their belt. You learn filmmaking and get better at it with experience. You learn so much from making a 5-minute film…imagine how much you learn by making ten of them and how much more ready you will be to make your feature epic? Because when you get there, you do not want to fail! If you do, it will be even more difficult to make #2 (if ever) and keeping away from ringing phones from your disgruntled investors.

So now comes the Everest climb…how to raise money to make a feature? How much money? If you are planning a less than $100K film raised from family and friends, then God bless you and good luck. The reality of making anything at that level with a possibility to be sold is slim, simply because you won’t be able to afford enough production values to make it compete in the marketplace. If you’re thinking “Hey, what about Rodriguez who did it with $7,000 and the guys who made The Blair Witch Project for $35,000 and sold it for a cool mill?” My answer is first: hundreds of thousands of dollars were spent by the respective studios to increase both films’ production values to release level, and second: how many Rodriguez have there been since him (and he proved through the years he had the big-time gift) and the Blair boys had a genius idea that surmounted their pedestrian execution which luckily enhanced their premise, and won the lottery when Artisan bought it and had the long-shot, first hit release driven by ingenious web hype. If you are in this game to win the lottery, buy weekly tickets instead.

Why are chances so slim to make a marketable feature for under $100K? Because the first biggest mistake is not to use professional actors and the second biggest is not to use professional crews like a good DP, focus puller, dolly grip, soundman, wardrobe, make-up, composer, etc…at that budget you simply can’t afford them and your results will probably be non-marketable. For the record, SAG has a low-budget agreement even for this budget level, and if you have a good script and are personable, and you can make pro actors believe in your filmmaking abilities (show them your best award-winning short) then they might devote a few weeks of time to work on your film with the hope it is a winner. In short, do not use family, friends, and amateurs in speaking roles in front of your cameras if you are making a feature film…it might be fun on the set but it will be hell at sales time.

In my experienced opinion, it takes in today’s world a minimum $500K to $1-mill to give you the ability to put together pros in front and back of your camera if you are serious about a chance at distribution sales. Now how to raise it…short of your last name being “Gates”, you gotta find investors wherever they lurk. Welcome to Everest!

When talking to people about investing their precious dollars, on what everyone on the planet (including millionaires at mental institutions) knows is a very risky venture, you’ve got to be smart and know how to put together the right investment presentation that will give you the very best chance to succeed. How hard is it to raise private money? Well, it took the talented Coen Brothers three long years searching for $250K to make their first feature Blood Simple and it took 46 investors to raise it. And that’s in 1984 dollars! Yes, that’s the perseverance and focused patience it takes!

The first hurdle is to come up with the answer to the universal question you will be asked by 100% of investors: “What happens to my money if you do not finish the movie?” Since everyone knows you cannot sell an unfinished film, your truthful answer: “You will lose every dime?” Not exactly one that will make checkbooks materialize! So what you first need is the boondoggle for all indie filmmakers: The Completion Bond. What is that and how do you get one?

A completion bond is an “insurance policy” that guarantees the investors that if the production runs into trouble they will step in and insure its completion even if the bond company has to put in their own funds to finish it. I call it the “necessary evil – false insurance”…necessary because it provides the only credible answer to the dreaded investor question, and evil because they are very hard to get for films under $1-mill and if you succeed in getting one you will now have a self-imposed “supervisor” with powers to rule over you. What does a bond cost? Between 6% to 3% of your budget…if you are a first-timer, it will be 6%…if a proven filmmaker with a track record, then closer to 3%. You will need to include this bond fee as a line item at the bottom of your budget.

When you sign the bond deal, you give them full power of authorization on your movie. They get to approve the budget and schedule and your major department heads…and they keep an eye on you like a hawk, as they should, to protect themselves. During production, they get daily reports of everything… how much film did you shoot, what time you broke for lunch, what time you wrapped, etc… If you are doing well and on schedule and budget, they will not hassle you and remain in the background. If you start to mess up, meaning you get 10% behind schedule or over budget, daily visits and meddling will occur instantly. If they feel your genius DP is too slow, they can fire and replace him…if they think you are shooting too many takes and using up more stock than budgeted or you are getting out of control or you’re overwhelmed, they can fire you and replace you with a hack director who can step in and finish the sucker fast. The bond is to insure “completion” to the investors…not to you. If they take over, they will finish the movie the fastest and cheapest way possible so they do not have to spend any or much of their own money.
Which is why I call it a “false insurance” because if the movie is completed in a hurried, uncaring, sloppy manner, it will not be much good. Yes, the investors will have a completed film but one very difficult to sell…thus the boondoggle!

Do not go to these bond meetings without bringing along the production manager who prepared your budget and schedule to answer all questions you will have no clue about such as how much gas is budgeted for the equipment trucks or why catered lunches are at $13.75 per. You will also need to show the resumes of experienced department heads you have recruited as they will want to approve your DP, first assistant director, stunt coordinator if any, sound man, editor, etc…the major players on your team. If one of those companies approves your show, they will give you a “Bond Intent Agreement Letter” which is free and all you desperately need to complete your investor package.

The Business Plan:
I have seen hundred of proposals and investment packages and most all are way too complicated and packed with nonsensical bullshit. I believe this is the primary reason why most filmmakers fail to raise feature funds, regardless of how good their networking skills. If you are doing a boxing movie, do not include 10 pages of ridiculous statistics about how much money Rocky made! Investors are not idiots, especially when parting with their money, and the best success you will have is to be professional in your presentation of a sober, carefully planned, easy to comprehend business opportunity.

I suggest you stick with this very simple, fair, and proven plan. First, you do not need to set-up a legal entity or hire a lawyer just yet…just make some stationary and if you don’t have a cool company name go with your name “John Smith Productions”. The simpler you keep this plan, the more professional you will seem, and your investors can give you a quick yes-no, which is what you want to keep moving forward up the slippery slope. How long should the plan be? One page! Here is all you need for text:
The Business Plan for the production of the motion picture “______”.

Plan Structure: 50-50 The Managing Partner (you) shall own 50% and investors shall own 50% of the movie.

Production Budget: $500,000 (for this example)

Investor Point: 1 = $10,000 (a point is one percent…you divide whatever your budget is by 50 since you are selling 50% of the movie. This becomes your investing formula: an investor who will invest $40,000 gets 4 points…an investor who can only invest $2500 gets 0.25 point, etc…)

Pre-Production Start Date: ?/?/?? (the one you think you can meet and raise all your money by…this is when the money will be due from investors. If you don’t raise enough by then, you change the date to a later one…if you already have committed investors, you simply send them a letter informing them the Pre-Production Date has been changed to ____, they never mind as it just delays when they have to give you their $$.

Next paragraph…Distribution of Revenue Sales (we’re still on the same page).
First Position: Investors Recoupment (this means investors get paid first their entire investment…if they insist it should include interest, don’t argue.)
Second Position: Deferments Paid (deferments are delayed payments negotiated with everyone - crews/actors/service - that will accept…if a DP wants $4000 a week and you only have $2500 in your budget, you offer $1500 deferred. This is not a guarantee as deferments are paid only if first positions have been paid.
Third Position: Profit Distribution (every dollar now gets split 50-50 between you and the investors)…if you can’t get the actors and crews you want to work for your budgeted salaries plus deferments, the last offer you can entice them with is “points” out of your share. If you made a winner, they get to share the win and own a small piece of the pie which everybody likes.

Important point: if you are the writer/director/producer or any combo or single title, do not write a salary for yourself in the budget when asking investors for their money to realize your passion dream…they don’t care how you have to survive while making the film…you show confidence and trust when they see not a dollar of theirs is going to pay your rent, food, or phone bill…you show that you are sure this film will make enough money to wait till profits to see your end. Thus, try hard not to give away points to others, as this is your share and all the money you will ever see on this film, that is if there is enough revenue to ever get to Third Position pay-offs.

Last paragraph: “As soon as the investor points have been committed, we will hire a lawyer to set up our legalized company to meet our start date.”

That’s it…your entire business plan and all anyone needs to say yes or no. Attached to this is another page titled: Investor’s Letter Of Intent. Write two sentences on it: “I _____have agreed to the intent of investing in the motion picture titled _____ and will commit $_____ for the ownership of ____% points due on the pre-production start date ______. I understand that a production company shall be formed by that time which will hold the copyright to the film, and I will receive a formal agreement with final terms and conditions to be agreed upon.” That’s it…add a space for your investor to sign and date below.

This is not a legally binding commitment, just an intention, thus no need for a lawyer or costs of setting up an entity…if you never raise the budget, why waste your money on legal fees? Now, when you have enough signed letters in hand to make your movie (totaling 50 points,) hire an entertainment attorney (legal fees should be in your budget but you’ll have to front it at this point as no investor has given you funds yet and you’ll get reimbursed later) and let the lawyer decide which is the best way to proceed. They will recommend a few ideas: probably a corporation, a limited partnership, or an LLC. This will partly depend on how many investors and what states they reside in as it applies to state taxation laws. Once the attorney has set up your company and all its intricacies, they will provide you with a more detailed investors’ agreement outlining the terms…you make copies and take those back to each investor before the due date…they hopefully read, agree, sign, and give you the check amount they had committed. Bravo…go make your movie!
However, if an investor has changed his mind months later when you returned or his daughter suddenly decided to marry the wacko kid next door and he now needs the money to throw a big smile, grit your teeth, and quickly go out and find another to replace him…either that or run over the wacko kid…all part of the Everest icy slippage factor.

The investor’s package includes the following in this order:

1) The Business Plan page and the Intent to Invest letter.

2) The script with a double-spaced, one-page synopsis clipped to the front…do not ask investors to read screenplays…they are busy folks making money…most will be happy to just quickly read what the movie is about “Oh, another teen comedy with lots of fart jokes…my kid likes those!” Bingo!

3) The full budget…they will never read it but they will know it exists and will read the “top sheet” which is all they care about. Explain the above and below-the-line numbers, point out the “zero” salary for you, the contingency at bottom (10%) to cover any surprises, the completion bond fee (6%), and of course the grand total at bottom.

4) The shooting schedule…again they won’t understand it so make sure you have a top page with the basics: # of shooting days, # of night shoots, # of location interiors and exteriors…so you look organized.

5) Resumes of department heads committed to your movie…you need those to show you are surrounding yourself with experienced folks to make up for your lack of it. If you have enough money to hopefully attract a small name actor pal, or you have chosen your lead actors already, have those pics and resumes included here.

6) Your own resume…make it sound as good as you can…every short film, every competition entered even if no wins, any awards, etc…if still sparse, throw in the Science Fair win in high school…at least they’ll think you got smarts and you’re not just a lunatic asking to take their money.

7) The Completion Bond letter that answers the dreaded question.

You now have a professional presentation for your film project: easy to understand by any interested layman, and a clear and concise investment structure for the production. Start out by printing about fifty of these presentations and then start looking for investors to hand them to at hopefully lots of meetings. How do you find “gambler-spirited” investors? Well, that’s the really hard part! If you want to make your film bad enough, start climbing Everest and don’t forget to bring along a first-aid kit for cuts and bruises.

Oh, I almost forgot, there is another option: the life affirming, karma positive, zen of craft, reality by fire experience…Project Greenlight. I hear that’s only a 50,000 to 1 shot for the privilege!

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