St. Louis MCA Meeting
Written by Mary J. Schirmer
June 10, 2015
Srikant Chellapa, producer-actor-director-writer
Jay Kanzler, attorney-executive producer-director-writer-actor
Michael H. Ketcher, producer-casting director-actor-writer
Michael J. Sewell, attorney-MBA
The topic was film financing, and each panelist offered helpful suggestions and valuable insights into the filmmaking business. Following are some of the highlights.
The Securities and Exchange Commission (www.sec.gov) is a government agency that attempts to protect investors and maintain fair markets. Filmmakers need to be aware of changing regulations regarding even speaking with investors before you have your own business in legal order and before you’ve vetted them in terms of their financial ability to do business with you.
Before you attempt crowdfunding, read about the SEC JOBS Act of 2012 (www.sec.gov/spotlight/jobs-act.shtml). This allows companies to sell stock, debt, or ownership interest in a film project online and allows film production companies to advertise for investors. Better read it for yourself, and then discuss it with your entertainment attorney before you make a “huge, stupid mistake that tells an investor to run away,” Kanzler said. You still have to find “rich people.”
Besides Kickstarter.com and Indiegogo.com, some equity crowdfunding portals for film projects are: Slated.com, Filmfunder.com, Angellist.com, Earlyshares.com, Gofundme.com, and Indiecrowdfunder.com.
The likelihood of finding millions of dollars in funding online are slim; however, name actors and directors have had success.
Kanzler suggested that crowdfunding works as an easy way to ask your friends and families for small donations. The process is especially effective for a short film.
Successful projects are usually the result of lots of hard work on the part of the “askers,” who have a long list of rich friends and social media contacts.
Sewell suggested thinking big, asking for $25,000 rather than $500.
Chellapa, who himself has invested in crowdfunded projects, said your film needs to have a hook to interest investors. Still, he said you’d be better off using your time on the telephone, calling friends, then friends of friends, and then their friends.
Ketcher, who has some experience launching a crowdfunding campaign, added that if you don’t meet your goal with some funds, you won’t get anything.
If you can find a tie-in with a not-for-profit agency, you might be able to make an arrangement with them to receive donations and pass them through to your company. The donor gets a tax write-off because the money goes to a not-for-profit, the agency gets the opportunity to further its mission as a result of the content of your film, and you get funded. You are allowed to make a profit on the film, either documentary or narrative.
The non-profit should provide a service to you as well, such as giving you access to its mailing list, who are part of your target niche audience, or they may help you write grants, Ketcher said.
Kanzler suggested you provide 2- 5 percent fee to the agency for its administrative assistance. He said to examine the success of the movie FIREPROOF, as an example of building a niche audience. (www.hollywoodreporter.com/news/sherwood-pictures-courageous-248204)
The Midwest Artist Project Services (www.midwestarts.org) is a new 501C3 agency designed to provide these types of services for filmmakers and other artists. St. Louis Volunteer Lawyers and Accountants for the Arts (www.vlaa.org) provide forms, seminars, and information about setting up your company.
Preparing your company to do business requires filing your business plan with the government. You need a private placement memo. Just remember that you can’t go public online or talk about your film project – even to friends and family – without all the legal paperwork.
Kanzler said that investors want to know one thing: What’s in it for me? They want to hear when they’re going to get their money back. It’s show business, after all.
You might get the same investors for some of your projects, but you might not. You might get distribution deals based on past success, but you might not. It never hurts to have a “big name” attached when talking with investors and distributors.
Before you accept money from investors, have paperwork in place to explain how you’re going to divide up the money, once it starts to flow. Legal obligations are one thing; moral obligations can keep you from sleeping peacefully.
Tax credits are one way to fund your project, if you can meet each State’s standards of minimum expenditure and residency requirements for crew. Missouri has no film tax credit now, and the Illinois program is on hold.
Filmmakers shouldn’t count on money from product placement. You might get in-kind services or gifts, though. In fact, you have to get clearance to use a product on film, if that product will be visible.
Kanzler said some companies won’t want their products in certain films because they don’t want to be associated with the topic of the film.
If the company says OK but won’t put that in writing, you’ll run into problems when you go to distributors. They’ll ask for the release.
While filmmakers might not be able to count on making a trailer to entice investors, you have to have something for a promotional website.
Sewell started a Meet-Up group, Equity Crowdfunding STL. They’ll meet Tuesday, July 7, 6 p.m., at the Business Bank Building, 8000 Maryland Ave., 2nd Floor, in Clayton. (www.meetup.com/Equity-Crowdfunding-STL)