Kunkhe Direct

Please note that these are marketing ideas. I am assuming that you have taken the correct legal approach to packaging your investment. Don’t take short cuts with the Corporations Law because you will get caught. Not only will you lose the money you have invested to get to where you are, but you will get fined or even possible get a gaol sentence. Worst of all you could be banned from raising money for life. So don’t do the wrong thing.

People like success and investors will invest in successful people. If you follow this rule getting money is easy. This is a principle that applies to all business ventures not just film making.

So start out small with a small project but demostrate that you have made money from it. Your seed project doesn’t need to be elaborate. An example would be making a short film which you can and have sold to a Pay TV channel as a “filler”. End result is that you have made a profit. Now you have a profit making “credit” as well as a production credit.

Learn to network. I know this comment is like tell everyone in the industry how to suck eggs. But how many film makers network outside the production community. If you are trying to attract money then fish in the “right pond”. You need to also network with venture capitalists, successful business people, financial planners, financial advisers, stock brokers and the like. Why because these people all have one thing in common they are connected to people with money.

Do a bit of seminar selling. The financial community has a lot a doubt about the film business and just about every investor has a horror story about a film investment. Start educating your network on why you are different to every other producer/film maker who has tried to get money. But don’t sell a film, sell the industry and how it works, sell your connections and most importantly of all, sell your success.

Again this is my personal view based on my person experience.

I would follow the small capital raising approach made available, i.e the 20 investors, not more the $2 million.

Why?

Because, it allows you to walk before you run. It sends a signal to investors, especially if it is your first project, that you are acting in a professional and business like way.

From a business point of view I would be concentrating in moderate projects with a budget that falls between $750k and $1 mill. Productions which target pay TV and sell through video. This will give you the chance to make back money, pay a dividend to your shareholders and then reinvest the capital and the profits into your next production.

The classic vehicle for raising funds from the public is what is known as a managed fund. This is a legal structure the same as a property trust.

It consists of a fund, a trustee and a manager. The fund is the “pot of money” contributed by the “unit holders”. The trustee is the unit holders’ representative and the entitiy which holds the fund and any assets purchased with the fund’s money.

The manager is the entity promoting the “scheme”, and managing the project in which the fund is investing.

This whole process is controled the Corporations Law and there are strict rules which must be followed.

It is a time consuming approach requiring a Financial Services Licence and a registered offer document (i.e. a prospectus) being registered with ASIC.

It is expensive as everything must be properly documented and checked by lawyers and accountants. While it is not a legal requirement, if you are going to have any chance of promoting a managed fund, then you will need a tax ruling from the ATO.

I have gone down this path and it was one battle after another. But if you can do it then you are able to promote your film project to the world at large, provided you adhere to the law.

This comment applies to Australia law, but most other countries will have similar rules.

I am now about to get into a grey area where some may consider I am giving legal advice. Let me make it clear that I am not, and you should not rely on anything that I say here. All I am giving you is a pointer in the right direction. If you want to go down this path you need to seek expert legal advice.

Having said that lets get on with it.

The second method is a small capital raising. Basically you are allowed under the Australian Corporations Law to raise, via a private company, no more than $2 million dollars from a group of people not exceeding 20.

You are allowed to do this on the basis that there is some connection between you and the people investing, i.e long time associates, accountant, lawyer etc. I assume you get the idea.

The advantage of this approach, in the Australia context, is that you are not breaking the Corporations Law.

The disadvantage is that the tax concession under Part 10BA of the Income Tax Assessment Act is only available to the company not to the individual investors. But hey your going to make money and so you should be in a position to pay fully franked dividends to you shareholders, who needs 10BA anyway.

The other advantage of this approach is that it is a more professional approach to the fund raising exercise. Do it right and it adds to your credibilty with your investors and just as importantly with the government regulators. (ASIC is always watching what people are doing).

The classic way a first time producer gets the funds to make the film is by passing the hat around amongst the family, relatives and friends.

The budget is usually topped up with credit cards or a mortgage over the house (if you’ve got one).

Chances are if you have family, relatives or friends who are wealthy they willl be less inclined to give you money.

End result is that you will in the end not raise much money following this approach, that is not to say that it isn’t any good, plenty of people have used it. However, don’t expect receive a large sum of money this was because it will not happen.

If you use this approach then it is ideal for mirco budget films.

A film investor is firstly someone who is passionate enough about films and film making to risk some of their hard earned cash in a project.

Secondly, if they are savvy, they know that they are making a risky investment.

Thirdly, because they know they are making a risky investment, they expect a decent return on their money.

A producer, if he or she wants to go back to investors a second and third time, cannot take the investor(s) for granted. If you do there are government agencies which which will give you grief.

Investors make your production possible, without them you have nothing, so treat them as “partners” in your project and share a reasonable amount of the profits with them.

Make a good trailer

The first step to getting good sales is to have an excellent trailer. To get an excellent trailer you need a good editor.

We’ve all seen the trailer will all the good parts of the film in it. Well that’s done for a reason to get people to by a ticket or buy the DVD. Make sure you brief your editor in what you want in the trailer and the ptich it should be making to the potential audience.

Also the editor can “fix up” problems in the story line and the acting.

Get a Distribution Deal or Sales Deal First

The film business is not much different to the building development business in that no one builds a 40 Storey building until they know that at least half the building has been let to long term tennants.

It’s the same with a film. A resonable standard feature film production will cost as much as medium size industrial/commerical building. Investors know how they will get their money back with a building, its called rent and if that fails, the building can be sold and the money recovered that way.

So don’t spend a cent on production (you have to invest in the script first) until you know that half the film is sold. i.e. you have distribution or sales deal, signed sealed and delivered.

Hire your weakness

The concept of writer, producer and director while sounding very nice usually doesn’t work unless you are Orson Wells or Stanley Kubrick.

A wise man, John C Maxwell said “A self made man hasn’t made much at all”

So hire, or find, your weakness. If you’re good at directing, or think you are, then get someone on board who is good at producing. If you can’t write, then don’t! Get someone who can. You get the idea.

By hiring your weakness, you will create a strong team.

Get a mentor.

Why?, because most people who are making films in Australia are doing so for the first time. Get a mentor, someone who has done it before, someone whose advice you trust.

One thing I have found is that I don’t know everything. That there is always someone else who has done it before. The success of IBM wasn’t that they invented great machines, it was that they copied good ideas and could sell them.

Do the same, learn from other peoples mistakes.

My advice is to any one in business, including the film business, is not get emotionally attached. Be prepared to walk away if you have to.

Was surfing the net and found an interesting article at the following link

http://www.tabula-rasa.info/AusHorror/OzHorrorFilms4.html

So time to retreat and think again.

The basics are very simple but if you are going to raise money for a project you need to develop the business case first. I know for some this would fly in the face of the “creative effort”, but unless you are using your own money, you have to have a film finance plan.

The plan should address all issue concerning the production and marketing of the film but the most important thing that must be addressed and addressed in some detail is who you are going to sell the film and how you are going to repay the investors.

Obviously the “saleablity” of the project revolves around two things, the talent to be used and the basic pitch of the film’s story.

You don’t necessarily need a “bankable” star, but you do need a good idea and a decent script. On the project I was trying to promote I commissioned five drafts of the script and it would probably been revised yet again if the project had gone ahead.

But if you want to have people lining up to invest in your second and subsequent projects you need to return the investment in your first project + some.

I hit the wall with the tax ruling because in the parlance of the tax office what I was proposing was “novel”, in other words, it was a completly new approach. I suspect it that the tax office didn’t have an opinion on it. In they end they employed delaying tactics in the hope that I would go away.

I didn’t give up, the window of opportunity closed, then the whole situation changed due to even more changes in the Corporations Law.

My name is Stephen, I am a chartered accountant by profession (you know a bean counter) but at the moment I am a group general manager of a fairly large Australian company. I am married with one son. I am not quite as old as Gandalf, but I been around. Being a bean counter I have an underlying interest in making money. I like the business of business.

I also have a fascination for film and television. I use to hang around the back of the Channel Seven studios in Sydney. They use to have tip out the back where they would dump all sorts of interesting things like old sets, off cuts from the editing room (no tape just film back then).

I made my first “film” on super 8 and then at uni I used to produce a TV show on the closed circuit system.

Once I left uni, I got sucked down the black hole of work ten years later after seeing bad Aussie film after bad Aussie film I decided to have a go myself.

I did a lot of research and found that a lot of bad films had been made because of the “hot” money chasing the big tax concessions under the original 10BA schemes. The side effect of all this was not only did the Government loose more than it planned but there was a lot of unhappy investors around who had lost money.

I also discovery that a great many film makers had the wrong attitude to their investors, see them as “donors” and not as investors. By that I mean, the film makers, didn’t put the interests of their investors first.

I also conducted some marketing research and found out that people interested in investing in film didn’t care about the tax concession etc, but they did care about getting their money back.

So all this research lead me to the conclusion that I could raise money for feature films on the basis that the films would be commercial and the investors would earn their money back plus a reasonable return.

I set up my own company, got the necessary licences from ASIC, did the prospectus. Although I had a battle with ASIC as they had missed the whole area of intellectual property when they revised the Corporations Law. So I had to educated them on the ins and outs of film financing.

And then came the tax office. Ever tried to get a public ruling for a film scheme? Ten months after lodging my application nothing, they lost it, they had it out with some other government department, they sat on it, then they asked a swag of questions and then it was too late.

I’ll tell you more later.