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MINING GOLD FOR FILMMAKERS: SOURCES OF FINANCING FILMS FOR INDEPENDENTS - Inside you will find 29 pages of information, including contact info, (names and addresses, URLs) for sources of independent film financing.
MINING GOLD FOR FILMMAKERS: SOURCES OF FINANCING FILMS FOR INDEPENDENTS - Inside you will find 29 pages of information, including contact info, (names and addresses, URLs) for sources of independent film financing.
US $29.95 MINING GOLD FOR FILMMAKERS: Sources of Financing Films for Independents By Ted Chalmers for www.movieplan.net © 2003 Chalmers Entertainment Corporation MINING GOLD FOR FILMMAKERS: Sources of Financing Films for Independents By Ted Chalmers for www.movieplan.net Disclaimer: This report is not to be construed as legal advice in any matter or form. The examples used are not based on any actual project, and the hypothetical dollar amounts are shown for placement and layout purposes only. The information provided herein is accurate to the best of my knowledge. However, no claim is being made that all of the information is current at the time of publication with respect to contact information and or the state and federal laws referenced herein. Please consult a qualified entertainment and securities attorney before embarking on any fund raising activities. This document should be read online as opposed to printed as it contains dynamic web links that, when clicked, will take you to a particular web site for more information on a subject or product. Here is my list of sources: 1. The Studio System 2. Other independent Production Companies 3. Producers Reps 4. Banks 5. Completion Bond Companies 6. Foreign Equity 7. Foreign Sales Companies (Presales) 8. Foreign Tax Credits 9. U.K. Sale and Leaseback 10. Grants: Funding for Independent Media 11. Cable Companies like HBO, Sci-Fi, etc. 12. Venture Capital (“VC”) 13. Investment Capital Groups 14. Self-Financing 15. Private Investors Let’s talk about each source of financing available to independent filmmakers. Page 1 The Studio System Yes, they still are a strong backer of indie films. Getting the attention of the acquisition executives can be a daunting task. It is recommended that you find representation through a Sales Agent or Producer’s Rep (more info below on both). However, you may approach the studios directly if you have the patience. Getting a quick answer or any answer is difficult. The best way to approach a studio is to appear as professional and qualified as possible. You will need letterhead and business cards to start off with. You will also need a well designed business package or proposal that includes cast, completed script and budget. As for cast, a studio is more likely to get involved if your cast is well-known. Putting together your package will be covered in a future report. But, suffice it to say that it is a long process to put a package together that has any merit. One method, the Negative Pick up, allows you to retain freedom and can occur any time during the production process. You usually enter into a negative pick up deal before production is completed. The deal can be used for post production. A negative pick up is an outright purchase of your film’s rights for a pre-negotiated sum. They end up owning the negative. In most cases, this is a contract and not actual cash. You still have to deliver the film. But, it is possible to have the contract (or paper) discounted by banks (see below) to get the funds needed to deliver the film. Then, use the cash to pay off the loan and your production costs. Studios also can acquire your films distribution rights for a specific length of time. This is a straight acquisition deal. This can occur any time before during or after production. Again, in most cases the money is not due until after you deliver (with very strict delivery schedules). Again, you will have to “bank” these contacts to get cash. A downside of working with studios is that they will take a lot of control away from you. So, the later into the production you sign with them, the better. Below is a list of the studios and certain key acquisition executives. For a complete listing of development and acquisition executives, I recommend a subscription to the Hollywood Creative Directory. Well worth the price. Seth Nagel Debbie Holbrook Manager Acquisitions Universal Pictures Columbia Tristar Motion Picture Group 100 Universal City Plaza 10202 West Washington Blvd. Building 509, Suite 1900, Culver City, CA 90232 Universal City, CA 91608, United States Tel 310-244-4000 Phone: 818-777-1000 Fax 310-244-2485 Fax: 818-733-0250 Page 2 Ellen Pittleman Jim Tauber SVP, Worldwide Acquisition VP, co-productions & acquisitions Paramount Pictures Twentieth Century Fox Film Corp. 5555 Melrose Ave., Hollywood, CA 10201 West Pico Blvd. 90038, United States Los Angeles, CA 90035, United States Phone: 323-956-8292 Phone: 310-369-1000 Fax: 323-862-0300 Fax: 310-369-1558 Andrea McCall Quinn Coleman Dreamworks SKG Worldwide Acquisitions 100 Universal Plaza Bldg. 479 Warner Brothers Universal City, CA 91068 4000 Warner Blvd. Tel (818) 733-9300 Bldg. 139, #25 Fax (818) 733-9984 Burbank, CA 91522 TEL (818) 954-6978 Sara Rose FAX (818) 954-6511 VP, Production & Acquisition MGM-UA 2500 Broadway Street , Santa Monica, CA 90404, United States Phone: 310-449-3000 Fax: (310) 449-3100 Page 3 Other independent Production Companies These may have studio deals and or other sources of funding available for you. Many of the studio’s films they release are actually produced by independent production companies with studio deals and or strong studio relationships. The advantage of going to these companies is that there are more of them. This means a better shot at getting your project actually looked at and covered. The independent production companies have a number of in-house development people that far out number the studios development departments. The right company can get your project into the studio system and get a co-production going with the studio in much less time that you trying to set it up with a studio directly. To find the right company to work with, you should research each company to see what studios they have affiliation with and what picture shave they recently produced. You are better off teaming with a company that has recently produced something similar. You can find this information in the Hollywood Creative Directory. You will need to address the letter to the head of development. Another thing to keep in mind is that most big name actors have their own production companies. If you have a strong script that is suitable for a star that just might get them an Oscar nomination, there is a good chance they will consider your script very carefully. In the past, I have had many meetings with such companies. You also make good relationships with their in-house development people, and you can come back with future projects even if they don’t make the first movie with you. I have been successful at meeting with production companies owned by Madonna, Kevin Costner, Jim Belushi and Eddie Murphy to name a few, based on projects that were suitable for them. Again, if your project is tailored to an actor and it is strong, you can really get a lot of progress by teaming with an actor’s company. The downside is that if its too pigeon holed for one actor it may be hard to set up anywhere else. Production companies not only are owned by actors, but also by writers and directors. Any one of them can be approached the same way if your project is open to attaching a writer or director. For a complete listing of development and acquisition executives, I recommend a subscription to the Hollywood Creative Directory. Page 4 Producers Reps The term, Producer's Rep, has become a catchall term for an agent, manager or anybody who knows how to sell a film. They can also find capital from a variety of sources but usually are involved with finding distribution deals. A Producers Rep is usually an attorney or former Distribution Executive that is well versed in distribution deal terms. They can help you set up your film project with the major film studios, independent distributors and sales agents. They usually have an extensive contact list that they are constantly nurturing by taking their contacts to lunch and setting meetings consistently over the year. They usually attend all of the major film festivals and film and TV markets around the world. Some of the producer’s reps will charge you an upfront fee or retainer for their services while others will either take their fees from the money they generate for you or take a percentage or commission on the deal. A Producer’s Rep is highly recommended if you are seeking a distribution deal. In the end, they can be less expensive than an entertainment attorney while still providing the same knowledge and protection (and in some cases they ARE an attorney). On the financing side, a producer’s rep can be very advantageous. They can hand carry your project into all of the major studios and networks to see if a pre-sale or pick up is possible. Their extensive contact list makes them a highly valuable resource in this area. They may require that they become an executive producer on your project should they secure the amount of financing you are looking for. They may also want to get hands on in the development of the project which can be a good thing as their contact list may extend to agents and managers and even talent directly. When choosing a producers rep, get plenty of references and find out which festivals and shows they attend. Also, choose a rep that is familiar with the genre and budget level of the film you are making. Below is a small list of some producers reps that I have worked with. Harris Tulchin Steven Beer Tulchin Entertainment Attorney at Law 11377 W. Olympic Blvd., 2nd Fl. Rudolph & Beer, LLP Los Angeles, CA 90064 432 Park Avenue South Tel (310) 914-7900 2nd Floor Fax (310) 914-7927 New York, NY 10016 Tel (212) 684-1001 Fax (212) 684-0920 Page 5 David Garber Mark Litwak Lantern Lane Entertainment Law Offices of Mark Litwak 2nd Floor 433 North Camden Drive 15422 Ventura Boulevard Suite 1010 Sherman Oaks, CA 91403 Beverly Hills, CA 90210 Tel (818) 222-2309 Tel. (310) 859-9595 Fax (818) 224-4028 Fax (310) 859-0806 Page 6 Banks They do loan money for movies but they expect a lot of protection in return… like your house as collateral or more! Lots of paperwork, too. Banks loan money to finance movies only under certain conditions. The most important condition is that there be some distribution contracts with some form of financial guarantee already in place. For example, if you have a film with a budget of $1 million, you will need to have enough distribution contracts with cash guarantees that will cover the entire budget AND the bank fees of around 12%. So, maybe you end up with 1.2 Million in distribution contracts and you can make the movie, right? Well, not exactly, these contracts must be from stable companies with a proven track record of fulfilling cash guarantees, etc. The bank will scrutinize each and every contract. If there is a shortfall in the amount if contracts, for example, say you only raise $1 million or $800,000. Then you will have what is known as a “gap” between your budget needs and your guaranteed distribution deals. In this case, and in rare instances only, the bank may decide to loan an amount of money equal to the shortfall. This is called “gap financing”. Gap financing is harder and harder to get. A few years back, some insurance companies provided policies to the banks that insured the gap amount and virtually guaranteed the amount to the bank, thus making it possible for the producer to secure the loan. But, most insurance companies involved with this scheme lost money and I do not think it is offered any more. After all they were looking to make money on premiums, a small amount , and the film business is a risky venture, so in many cases they had to pay the claims to the banks and lost a lot of money! Here is a sample Letter of Interest from a Bank Finance Entity: Re: Production Financing for “Joe Movie” Dear Mr. Producer: Thank you for contacting our Bank (the “Bank”) to discuss your financing needs for the feature films entitled “Joe Movie” (the “Picture”). This letter will confirm our interest in providing the interim production financing for the Picture, subject to the completion of our due diligence, and formal credit approval by the Bank's Senior Credit Committee. The following is for discussion purposes only and is neither a commitment nor obligation to lend. The proposed terms and conditions for our involvement are predicated upon the following assumptions: Borrower: A newly formed special purpose company, the sole activity of the Borrower is the production of the Picture. Facility Type: Production loan. Page 7 Purpose: Solely for the purpose of financing a portion of the production costs of a theatrical motion picture, presently entitled “Joe Movie”. Loan Amount: US$1,750,000. This amount is subject to prepayment at closing of interest reserves as customarily calculated, loan fees, legal fees and disbursements and other lender charges. The total estimated bank charge is $190,000. Interest Rate: Daily floating rate equal to 1/360 of Bank of America “prime” rate plus 2.0%, payable monthly. Loan Fee: 2.25% (US$39,500) of total Loan Amount earned and payable at Closing. Gap Fee: N/A Legal Fees: Reserve established in the amount of US$15,000. A deposit of US$5,000 will be remitted along with the acceptance and signing of a commitment letter, if provided by THE BANK, with the remaining balance of US$15,000 due at closing. Interest Reserve: To be calculated based upon the production cash flow. Currently estimated to be approximately US$135,500. Repayment: Interest is due monthly and will be capitalized under an interest reserve included in the facility. The Bank will receive 100% of gross revenues generated from the Picture until 100% of principal, interest, and miscellaneous expenses, including legal fees have been repaid in full. Loan Maturity: 24 Months from closing. Security: Borrower to assign to Bank and grant to Bank a first position security interest in all rights, title, and interest in and to the Picture, all accounts receivable, general intangibles (including copyright) relating to the exploitation and distribution of the Picture, all existing and future distribution agreements, and all proceeds from the distribution, exhibition, and exploitation of the Picture, subject to inter-party agreement(s), Notice of Acknowledgement and Assignment(s), inter- creditor agreements, security agreement and loan agreement. Security to include all rights to receive proceeds from any tax or subsidy transactions relating to the Picture. Standard security filings for facilities of this type including (but not limited to) mortgage of copyright, UCC filings, as well as laboratory pledgeholder agreements, and guild subordination agreements. Bond Company: The Bank will be a beneficiary of a completion bond covering the amount of our loan, from a bond company acceptable to THE BANK, covering the delivery of the film. Page 8 Special Requirements: E&O insurance - Additional Insured Full Production Insurance - Loss Payee. Conditions: 1. All Distributors to execute either an Interparty Agreement or Notice of Assignment and Acknowledgment on THE BANK's standard form, waiving all defenses, rights of offset and approval rights and subordination of liens. 2. Borrower to have good and marketable title to literary rights subject to no liens or encumbrances. Chain of title documents to be approved by THE BANK's counsel. 3. Any existing liens against Picture to be terminated. 4. No material adverse change in Producer’s or Distributors’ financial condition or results of operations. 5. No pending litigation against Producer or, as may relate to the Picture, against or by any Distributor. 6. All Loan Documents to be prepared by THE BANK's counsel and to be in THE BANK's customary form. THE BANK and its counsel to review and approve all documents and other matters relating to the transaction, including other financing arrangements. 7. The producer will be YOU. 8. Joe Sales Company will be the sales agent. Sales agent fees and expenses will be subordinated until the loan is repaid. 9. THE BANK will be in first recoupment position from all world territories. 10. Net presales/investments, after deposits, as follows: Distributor/Investor Territory Amount Owed Maximum Pictures World Ex US 1,000,000 Fright TV* US 750,000 Total 1,750,000 *payable over a 24 moth period Once again this is not a commitment to lend. The final terms and conditions may change and are subject to bank credit committee approval. Any changes in the aforementioned assumptions will directly impact our ability and interest in considering your loan request. This letter supersedes all prior discussions and agreements, if any. Page 9 I trust this letter meets your needs and outlines the general terms we have discussed. I would be happy to speak with you to further explore the prospects of a production loan. If you have any questions, please call me. Yours truly, Joe Banker Here is a List of Banking Organizations that specialize in Entertainment Lending. Bank of America NT Banque Paribas Commercial Banking Entertainment Contact: Michael Mendelsohn, Office Contact: Kapil Sharma Consultant; Douglas Hansen, VP; 2049 Century Park East, Suite 200 Rene Turin, Entertainment Coordinator Los Angeles, CA 90067 2029 Century Park East, Ste. 3900 Tel (310) 785-6015 Los Angeles, CA 90071 Fax (310) 785-6100 Tel (310) 551-7300 (For productions of $5,000,000 or more) Fax (310) 556-8759 City National Bank Lewis Horowitz Organization Entertainment Division Contact: Lew Horowitz, Pres.; Contact: Daniel Zbojniewicz, Sr. VP Arthur Stribley, Sr. VP; Brenda Dolby, 400 No. Roxbury Drive, 4th Floor VP Beverly Hills, CA 90210 1840 Century Park East, 2nd Flr. Tel (310) 888-6183 Los Angeles, CA 90067 Fax (310) 888-6159 Tel (310) 275-7171 Fax (310) 275-8055 Union Bank of California Contact: Christine Ball California United Bank 495 S. Figueroa, 16th Floor Contact: Gwen T. Miller Los Angeles, CA 90071 16030 Ventura Blvd. Tel (213) 236-5828 Encino, CA 91436 Fax (213) 236-5852 Tel (310) 475-2342 Fax (310) 446-3101 Imperial Bank/Comerica Entertainment Industries Group Mercantile National Bank Contact: Morgan Rector Entertainment Industries Division 9777 Wilshire Blvd., 4th Floor Contact: Melanie Krinsky, Exec. VP Beverly Hills, CA 90212 1840 Century Park East Tel (310) 338-3100 Los Angeles, CA 90067 Fax (310) 338-3171 Tel (310) 282-6708 Fax (310) 788-0669 Page 10 Chase Manhattan Bank Entertainment J.P. Morgan Entertainment Ind. Group Industries Group Contact: John W. Miller, Managing Contact: John W. Miller, Managing Director; Director; P. Clark Hallren, Christa P. Clark Hallren, Christa Thomas, Thomas, Kenneth R. Wilson, VP's; Kenneth R. Wilson, VP's; Elizabeth Fjelstul, associate; David 1800 Century Park East, Suite 400 Shaheen, Analyst Los Angeles, CA 90067 1800 Century Park East, Suite 400 Tel (310) 788-5600 Fax (310) 788-5629 Los Angeles, CA 90067 Tel (310)788-5600 Comerica Entertainment Group Fax (310)788-5629 Contact: Morgan Rector, Pres. 9777 Wilshire Blvd., 4th Floor Chemical Bank Entertainment Group Beverly Hills, CA 90212 1800 Century Park East, Suite 400 Tel (310) 281-2400 Los Angeles, CA 90067 Fax (310) 281-2476 Tel (310) 788-5600 Fax (310) 788-5628 Completion Bond Companies Banks want to loan money. But more importantly, Banks want to make money. They make a very small amount on the money the loan. So, they have to be very careful about who they loan money too. Your film with have to be bonded, i.e. a completion bond company must be paid to guarantee to the bank that the film will be completed. Look at this as a form of insurance policy. Most banks have a list of Completion Bond Companies that they work with. But, a list can also be found here: Film Finances Incorporated International Film Guarantors 9000 Sunset Boulevard Suite 1400 10940 Wilshire Blvd., 2010 Los Angeles, CA 90069 Los Angeles, CA 90024 Phone: (310) 275-7323 Phone: (310) 208-4500 Fax: (310) 275-1706 Fax: (310) 443-8998 firstname.lastname@example.org Steve Mangel www.filmfinances.com email@example.com www.nnng.com WorldWide Film Completion, Inc. 2901 28th Street, Suite 290 Motion Picture Bond Co. Santa Monica, CA 90405 1801 Avenue of the Stars, Suite 1010 Phone: (310) 450-1600 Los Angeles, CA 90067 Fax: (310) 450-3399 Phone: (310) 551-0371 Contact: Robert Mintz Fax: (310) 551-0518 firstname.lastname@example.org BJ Rack: BJRack@mpbond.com www.wfcbond.com www.motionpicturebond.com Page 11 Complete Film Co. LLC 3000 W. Olympic Blvd., Suite 1432 Santa Monica, CA 90404 Phone: (310) 315-4767 Fax: (310) 315-4768 Contact: Mark Fink, President email@example.com Foreign Equity A natural source of financing are the very buyers who need product. Many times they will take their territory as part of the deal, in addition to their equity stake. Has suffered some over the years as local production in Foreign countries has proliferated. A Foreign Sales Company can help with this kind of financing. To find foreign sales companies, please visit the web site of the American Film Marketing Association (“AFMA”) at: http://www.afma.com/members/mem_directory.asp For a complete listing of foreign distributors and buyers, I recommend The Hollywood Creative Directory Foreign Buyers List available at http://www.hcd,com. Foreign Sales Companies (Presales) Sort of combines 4 and 5 above. Can include equity positions for foreign buyers but is basically a sale of the territorial rights before the film is finished. Then, if the buyer is a strong distributor in the territory a bank MAY lend money to the production based on the amount of the contract, with a deep discount, high interest or both. Pre-sales have come and gone over the past few years. Unless your project has valuable name actors, it is very had to get those going. It also take a very long time to put together. To find foreign sales companies, please visit the web site of the American Film Marketing Association (“AFMA”) at: http://www.afma.com/members/mem_directory.asp Page 12 Foreign Tax Credits Foreign Tax Credits are basically rebates from Foreign Governments on money that you spend in their country while making a movie. The amount of the rebate can be substantial, like 25% or higher! Canada is a big Tax Credit hot spot for American Producers. When combined with a Canadian Content deal, where some of your major cast and talent are Canadian, this rebate can be increased even higher! But, trying to make a movie fit within the content restrictions can limit your powers as a producer. Also, you most likely will have to either form a Canadian company or partner with one. For more information on Canadian Tax Credits, please visit the following: Canadian Film and Television Production Association: www.cftpa.ca Ontario Media Development Corporation website: www.omdc.on.ca Telefilm Canada: www.telefilm.gc.ca U.K. Sale and Leaseback The leasing structure developed in the UK enables a qualifying film to be sold by a producer to a partnership. That partnership is a see-through vehicle for tax purposes and enables tax losses to be passed on to the individual partners in that partnership. The partnership then enters into a finance lease, usually for a period of 15 years, leasing back the distribution rights to either the original producer or a third party. As far as the producer is concerned, the distribution rights will be exploited in the normal way. The only change that has occurred is that the original "freehold interest" that the producer once enjoyed has now been turned into a leasehold interest under a 15 year lease. You will find below a diagram which shows the way in which the structure operates. In order to fully exploit this structure, the production must be a British production. The qualifications of such include the primary producer being British and 70% of the budget being spent in Britain. There are ways to structure this for American companies. There is an excellent web site on this subject from Scotts Atlantic, a company that can help you structure a U.K. Sale and Leaseback. Please get in by going here: http://www.scottsatlantic.com Page 13 Grants: Funding for Independent Media These are also available for the filmmakers who are eligible and are willing to deal with application process. Here are some informative web sites on applying for Grants: The Independent Television Service (ITVS): Established by Congress " to encourage the development of programming that involves creative risks and that addresses the needs of underserved audiences", ITVS has more than 115 single programs and 17 limited series in production or distribution. Their site contains funding guidelines for all initiatives including OPEN CALL and LiNCS. www.itvs.org National Endowment for the Humanities: supports films and videos with humanities content. www.neh.fed.us/index.html Corporation for Public Broadcasting: Includes information on programs, grants and public television stations. www.cpb.org The Indie Scene on PBS: PBS’s web site for providing information about procedures and guidelines for PBS and other public television entitites. Highlights and provides information on indie films on public television and connects makers to resources. Has excellent explanations and links to and of the public television system. www.pbs.org/independents Fundraising consultant Morrie Warshawski has compiled an excellent bibliography with many links to resources and publications about fundraising as well as to funding sources. www.warshawski.com The Moving Image Fund - a three year special initiative of LEF New England to focus support on the media arts in New England. The goal of the initiative is to strengthen the independent voices of New England film and video artists and to increase audiences for their work. new guidelines are available at: www.lef-foundation.org Massachusetts Foundation for the Humanities: Funds humanities initiatives and programs, including film and video. The site includes information about their grant programs, as well as links to all the other New England Humanities Councils. www.mfh.org Massachusetts Cultural Council: Listings of all the Councils programs and services. www.massculturalcouncil.org http://www.nyfa.org/vaih: A program of the New York Foundation for the Arts, the Visual Artist Information Hotline is a free national information service for individual artists working in all visual arts media (painting, sculpture, photography, film, video, Page 14 drawing, printmaking, crafts, etc). The Hotline empowers visual artists by providing them with information about resources to facilitate their work. Artists can speak directly with staff at NYFA by calling (800) 232-2789 between the hours of 1 and 5 p.m. EST, Monday through Friday. During other hours, artists can request information either by leaving a message on their voice mail, or by e-mailing them at firstname.lastname@example.org. The Foundation Center http://fdncenter.org The Paul Robeson Fund for Independent Media: supports independent social issue film, video and radio. Check their site for guidelines and application information. www.fex.org/robeson Massachusetts Media Fellowships: www.bfvf.org Grantscape: A resource about funders and fundraising for non-profit organizations and projects. Check out their "funder of the day". www.grantscape.com The Moving Image Fund: A three year special initiative of LEF New England to focus support on the media arts in New England. The goal of the initiative is to strengthen the independent voices of New England film and video artists and to increase audiences for their work. new guidelines are available at: www.lef-foundation.org. Cable Companies like HBO, Sci-Fi, etc. They have been making indie films for years. Used to be a great source, but dried up as they started their own in-house divisions and now rely less on indie producers. For example, HBO used to co-producer with indie producers some 13 movies a year and now it is something like 3 a year. They also pick up less and less “premieres” which would get you some funding. On the brighter side, channels like Sci-Fi Channel are actively pursuing co=productions with indie producers that can deliver on the genre they are acquiring. The kinds of deals they are looking for vary, but at the script and development stage, they would commit up to 50% of the budget for the TV rights. In most cases they will insist on having the first window of exhibition, i.e. a Premier Movie or Original. All other media like Theatrical, video, etc. would have to go after there premiere. But, for half your budget that’s not a bad deal! You can also sell your video rights or remaining Global rights to a studio or video company that will put you in profit before you even shoot a frame of film!!! Other channels to target for this kind of deal would include COURT TV, LIFETIME, ABC FAMILY. Page 15 For a complete listing of development and acquisition executives at these channels, I recommend a subscription to the Hollywood Creative Directory. Here are a few contacts: Chris Grunden Tom Vitale HBO Enterprises USA Networks 1100 Ave. of the Americas V.P. Acquisitions 15th Floor, 1230 Ave. of the Americas New York, N.Y.,10036, New York, NY,10020-1513 Tel. (212) 512-5055 Tel. (212) 413-6531 Fax (212) 512-5903 Fax (212) 413-5703 Gary M. Garfinkel Taly Johnson Showtime Networks Inc. USA Networks VP Acquisitions 1230 Ave. of the Americas 10880 Wilshire Blvd., Ste.1600 New York,NY,10020-1513 Los Angeles, CA 90024 Tel. (212) 413-6530 Tel. (310) 234-5392 Fax (212) 413-5773 Fax (310) 234-5281 Alan Sternfeld Brett Marottoli Lifetime Television Starz Encore Group SVP/Planning, scheduling, and Senior Manager, Multi-Cultural Acquisitions Acquisitions 309 W. 49th St. 16th Floor 8900 Liberty Circle New York NY,10019 Englewood, CO 80112, Tel. (212) 424-7383 Tel. (720) 852-8455 Fax (212) 424-7024 ax (720) 852-7316 Page 16 Venture Capital (“VC”) Not an ideal way to go as Venture Capitalist tend to be very hands on. Also, film ventures are usually far too risky for them. LISTINGS OF VENTURE CAPITAL FUNDING WEB SITES AND RELATED INFORMATION Venture Capital Funding from your friends at AddVenture Capital!! http://www.addcapital.com/vcf.html Secrets of Venture Capital http://www.ventureplan.com/vcsearch.htm Venture Capital UK - UK Venture Capital - UK Equity Finance - UK Business venture capital, U.K., venture capital funds, angels, business angels, start up finance, equity finance, development capital http://www.venturecapital.co.uk/ Venture Capital Reports and Checklists . Reports and Checklists . Each Report just $9.95 or Order all 7 reports for just $59.95 plus shipping and handling. http://www.hawaiian.com/vpa/order1.htm VSG-Fund Venture Strategy Group is an early-stage venture capital and strategy consulting firm serving the needs of marketing-driven growth companies. http://www.venturestrategy.com/vsg_fund.html PSN CAPITAL VENTURES PSN Capital Ventures is prepared to cause Investor Trust funds to be deposited into your bank. http://mall.mwci.net/psncap/ Belanger Guy & Associates Corporate marketing and planning services. Venture Capital, Corporate representation, International Marketin, Multimedia Marketing, Submissionsfor Government Financial Assistance. http://adhere.on.ca/bga/ Ameritech Development Venture Capital Business Products Ameritech Home Search Feedback Ameritech Development Corporation ("ADC") is a wholly-owned subsidiary of Ameritech Corporation ("Ameritech") http://www.ameritech.com/products/venture/ A New Venture Capital and Marketing Source: Connexx International Proven networking publication that provides new business connections; matches buyers/sellers, investors/entrepreneurs; delivers free marketing consulting. http://ns.webb.com/connexx/finan.html The Venture Site-Links to other SME/VC sites Useful links to other SME/VC sites . UK . The British Venture Capital Association (BVCA) has an extremely useful site for Page 17 Business Angel investors and entrepreneurs. http://www.investor-news.co.uk/links.html STRATEGIC PARTNERSHIPS WTH FOREIGN VENTURE CAPITAL by Michael J. Kelly David E. Raphael, Dinesh Kakadia (Summary of the full paper published in April 1995 by SRI International) http://www.marcar.com/txt/foreignVC.txt U.S. Publishing & Lists Exchange - Home of "Worldwide Business Connection" International Trade For The Entrepreneur http://www.uspubs.com/ Silicon Valley Sources of Venture Capital About Silicon Valley Accommodations Air Waves Associations and Organizations Attorneys Cities and Towns Companies Educational Institutions Employment Opportunities Financial http://www.netview.com/svg/vc/ Seed Grant: Venture Capital from the Ben Franklin Technology Center The Seed Grant program, sponsored by the Ben Franklin Technology Center of Western Pennsylvania, is intended to help small businesses within Pennsylvania perform high-quality http://www.bftc.org/brochure/grants/seed/seed_main.html Venture Capital Master List "When fortune comes, sieze her firmly by the forelock, for, I tell you, she is bald at the back." - Leonardo DaVinci http://sulcus.berkeley.edu/FLM/SH/MDL/Invention/Capital.html Ameritech Development Venture Capital Business Products * Ameritech Home * Search * Feedback Ameritech Development Corporation ("ADC") is a wholly-owned subsidiary of Ameritech. http://www.ameritech.com:1080/products/venture/ Hold on to your venture capital ! HOLD ON TO YOUR VENTURE CAPITAL !! http://www.financingsources.com/venture-capital/venture5.html HANG ON TO YOUR VENTURE CAPITAL !! http://uniquorn.simplenet.com/venture.htm The Holland Sentinel: Business: Venture capital can be hard to attract Welcome to The Holland Sentinel newspaper. Come on in to learn more about the many happenings in West Michigan as well as the great vacation areas and activities offered lakeside. http://www.thehollandsentinel.net/stories/111697/bus_venture.html American Venture Capital Exchange American VENTURE Magazine. A quarterly magazine for entrepreneurs,"angel" investors, venture capitalists and other accredited finance providers that capitalize new. http://www.avce.com/ FinanceHub: Home (v. Html2.0) In addition to our Website and Software Development activities, InterSoft Solutions maintains the FinanceHub - our flagship site, assembling Page 18 pointers to the best financial resources http://financehub.com/welcome.html Australian Venture Capital Guide 1997. http://www.ozemail.com.au/%7Evbivell/webdoc1.htm Venture Capital - Venture Capital Participation Opportunity.. Venture capital opportunity to become Media Sponsors for Direct Response Television advertising. Short term, low risk, and opportunity for over 25% returns in 75 days. http://investorcapital.050.com/Venture.html Venture capital fund starts raising money on the Web By Samuel Perry SAN MATEO, Calif., (Reuters) - It now takes no more than the click of a button for a person of reasonable income and a bit of money in the bank to join the elite. http://www.pathfinder.com/money/latest/rbus/RB/1998Jan06/793.html Wilson Sonsini Goodrich & Rosati: About Our Firm - Attorney Profiles Jonathan Axelrad Jonathan Axelrad was born in New York City in 1962. He attended Wesleyan University in Middletown, Connecticut (B.A. with High Honors, Phi Beta Kappa, 1984)/ http://www.wsgr.com/WSGR/Profiles/axelrad.htm Business Plans and Loan Brochures: Saving small to medium sized business by Business Plans and Loan Brochures. Business Turn-Around Loans: Saving small to medium sized business by helping with business plans and venture capital loans.. http://www.action-links.com/businessconsultant/loans/word1.htm ABQjournal Opinion Date of publication: Tuesday, 02-Dec-97 09:08:57 MST Return to the OPINION page Don't Play Fast Games With State Nest Egg The State Investment Council has launched on a venture http://www.abqjournal.com/opinion/1OPD02.HTM Investments by VC firms soar in area-Washington Business Journal Monday-November 17, 1997 Investments by VC firms soar in area. Matt Andrejczak and Mark Hilpert Staff Reporters Global TeleSystems Group Inc. and Gene Logic Inc. http://www.amcity.com/journals/high_tech/washington/1997-11-17/st NEC Press Releases - Convergance Partners Press Releases New Venture Capital Firm Debuts With $60 Million Initial Funding. Convergence Partners Plans Global Approach To Funding, Counseling Entrepreneurs. MENLO PARK, Calif. http://www.nec.com/company/RecentPR/970331.html Venture Capital Financing for New Businesses, Inventors & Entrepreneurs Last up-dated 10/31/97 If you are looking for capital for a new business venture, invention or idea... If you wish you had gotten in on the ground floor of something that turned http://www.adventurecapital.com/ Venture Capital dates back to the 1950's when a Harvard professor named Armand Doriot created a investment fund to support risk ventures. http://www.webdirect.ca/melia/venture.html Page 19 FinanceHub: How to Get Venture Capital Links (html2.0 version) to some excellent articles by venture capitalists about how to go about getting them to fund your project. (html2.0 version) http://financehub.com/vc/about.html Technology Funding Technology Funding Venture Capital Fund VI (VC-6) is an aggressive-growth fund that gives individual investors the chance to become venture capitalists with a minimum investment of ... http://www.techfunding.com/ Avent International Venture Capital Advent International Venture Capital. Business Products Advent Home Search Feedback Advent International ("Advent") is a venture investment firms interested in technolog http://www.datamerge.com/venture/capital/adventvc2.htm Investment Professionals Who We Are. The four general partners of Keystone have more than 80 years of collective business experience as entrepreneurs, corporate officers, and commercial and investment http://www.keystoneventures.com/invprof.html venture capital financing Advent International Venture Capital. Firm Profile Advent Investments Search Feedback Advent International ("Advent") is interested in investing in companies as indicated http://www.financingsources.com/venture/capital/advent23.htm Venture Capital Hits New Heights In 3Q Search CMPnet: Advanced Search Sections News Stocks/Finance Web Development Product Reviews Company Profiles Trade Shows ActiveX/Java Careers Opinion Humor Advertisement ... http://www.techweb.com/investor/news/1997/11/1120venture.html Your Company: How to raise venture capital Week of Week of February 10-14. How to raise venture capital. Obviously, it's not easy-but here are some tips from VC execs on the things they like to see in a proposal. http://www.pathfinder.com/money/yourco/9702/970207.weekly.html Page 20 Investment Capital Groups Companies that have raised large sums of money specifically fore entertainment investing. Will probably cost as much as a bank with the control of a VC. Newmarket Capital Group LP Contact: Chris Ball, Will Tyrer, Co-founders 202 N. Canon D. Beverly Hills, CA 90210 Tel (310) 858-7472 Fax (310) 858-7473 Self-Financing Won the lottery lately? Robert Townsend did with credit cards, which I would not advise. Robert Rodriguez allowed pins and needles to be poked to his body for a fee. What can you come up with? Making movies with your own money is the easiest way to go. No one will tell you how to make your film. But, since film is so risky of an investment, I don’t recommend this. It is always safer to use other people’s money. I have seen more than one filmmaker blow a life’s savings on a film that nobody will ever see. Private Investors The most accessible source of financing for independent filmmakers. Private investors are doctors and lawyers and whatever other profession is out there that has a little capital to play with. When I was in Cannes recently for the festival, I had lunch next to a couple who just happened be in town from Texas and they were telling me how excited they were to have recently invested in a low budget independent film. He was an engineer! The most popular method to raise private money has been the Limited Partnership Agreement. A limited partnership gets its name from the fact that the investors in such a project are “limited” only to there investment amount in terms of liability. They have no say in the running of the partnership. They are “passive” investors. You , the General Partner, make all the day to day decisions. In order to solicit private investors for a limited partnership, you will need a Private Placement or Investment Memorandum. To buy a template you can edit, (or to get a FREE sample), please got to: www.movieplan.net. How do you find actual real investors? Again, there is no magic to this. You will need to compile a list of people you know that can afford to invest large sums of money. If you don't have a list, you will have to go to someone who packages investments. The trick here is there are S.E.C. rules for soliciting an investment. They have to be people known to you. Maybe you have a doctor who Page 21 would consider such an investment. If so, he will probably know other doctors. I know it sounds lame, but this is how it's done. It would be easy if you could just run an ad and ask for investors, but its just not legal. Certainly, you could call a list of potential investors from whatever source you have and ask them if they would be interested in such an investment. If they are, then you can send them the investment memorandum. If they like what they see, then you can send a complete prospectus (which is the actual offer). There are many problems to indie filmmaking and financing is just one of them. Probably the best filmmaking book is "Independent Feature Film Production" by Goodell. This is one of the only indie filmmaking books that actually includes information on film financing and the documents and procedures required. When you speak to someone about financing your project you MUST be VERY careful. Investing in your film is a SECURITY and as such is regulated by the SEC. That's right, the Securities and Exchange Commission (aka: The Feds). Improper procedures or discloser can result in fines or more. When seeking investors make sure that you're not speaking to people that you're not acquainted with. If you do, the Feds can classify it as "solicitation". That's illegal. Here is another problem. If you offer it in the wrong way say, announcing it at a party or placing an add in a magazine or similar media, they can classify it as a "Public Offering"...Again, this is illegal. This one would cost you, the filmmaker, dearly. You would be required to register the stock with the SEC and that is quite costly. Be careful and make sure you're attorney looks over the information before you proceed to financing. If you don't have a lawyer, usually there are some local support groups that can help you find one. Contact you're local IFP or the closest IFP office (http://www.ifp.org) to you. REGULATION D : A popular option As mentioned above, you need to follow certain rules or you will get in trouble. When raising money, securities must be registered with the Securities and Exchange Commission. This entails detailed disclosure, historical financial statements, and third party audits that take time to assemble. The whole thing requires many hours of assistance by attorneys and accountants, and the SEC review can last from 20 to 60 days. It can cost a business thousands of dollars even before the offering makes any money. HOWEVER, a private placement using an Investment Memorandum, however, is EXEMPT from federal registration. Exemptions have always been available under the Securities Act of 1933 (the Act), but the original exemption provisions were vague and, therefore, risky for business owners to invoke. Page 22 In 1982, the SEC adopted Regulation D, which set forth objectives and rules for exemptions from registration with the SEC. Offerings exempt under these rules 504, 505 and 506 have become the most common cost and time saving methods for indie filmmakers to raise capital from private investors. Here is a brief breakdown of the rules: Rule 506 : Allows you to make limited offers and sales of investor shares regardless of the dollar amount of the offering. This exemption does not limit the number of accredited investors (An accredited investor is any one investor with a certain net worth and or experience in the purchase of stocks.), but the number of nonaccredited (i.e. your friends and neighbors, most likely) investors may not exceed 35 investors. All nonaccredited purchasers, either alone or together with a designated representative must be sophisticated enough (i.e., have the knowledge and experience necessary) to evaluate the merits and risks of the investment. (An offering company typically determines the sophistication of its investors with a questionnaire subscription agreement.) Rule 506 requires detailed disclosure of relevant information to potential investors; the extent of disclosure depends on the dollar size of the offering. Rule 505 : Offerings may not exceed $5 million, less the total dollar amount of securities sold during the preceding 12 month period under Rule 504, Rule 505 or Section 3 of the act. This exemption limits the number of nonaccredited investors to 35 but has no investor sophistication standards. Rule 505 requires disclosure similar to that required for Rule 506 offerings, under $7.5 million. Rule 504 : Offerings allow a business to raise a maximum of $1 million, less the total dollar amount of securities sold during the preceding 12 month period, under Rule 504, Rule 505 or Section 3 of the act. However, a business can raise only $500,000 by the sale of securities to persons residing in the states of Montana and Alaska, which have no disclosure laws applicable to the offering. For the states that do have disclosure laws, which are 48 out of the 50 states, a business can raise up to $1,000,000. Rule 504 has no prescribed disclosure requirements, no limit on the number of purchasers, and no investor sophistication standards. Rule 504 is the most commonly used Regulation D exemption. Offerings that are exempt under Rule 504 are relatively simple to prepare, which reduces cost and delay and can generally be underwritten by the offering company (the securities being sold by the company's own officers, directors and employees). Helpful Websites: http://www.movieplan.net http://www.ifp.org http://www.regdresources.com/index.cfm http://www.indiefilmfinance.com/ http://www.filmfinance.com/ Page 23 How To Approach Investors Finding investors is always the trick. You should first approach your "soft" market around you, i.e. friends, family, doctors, etc. Anyone that has enough money to be qualified as an investor, i.e. Can lose their investment with no effect on their lifestyle. Once you start talking to people, ask them for the contact info of other investor possibilities. The trick is that your investors must be "known" to you in order to avoid SEC filings. So, if they are a friend of a friend you will need to have your friend set up a meeting with the three of you to discuss something other than the film investment first. If the bring it up, then its ok. Sounds lame, but the law is the law. You also have to check your state's laws with regard to the number of people you can approach. This is limited if you want to avoid the SEC filing. In California, you can solicit any number of investors, so long as this is direct solicitation and not a public solicitation on the Internet or in a publication. There is also a limit to the number of investors allowed in the partnership. In California, for example, this number is 35. You should be able to look these rules up on the internet or consult a securities attorney. You can also create a web site for your film, promoting the production, cast, story, yourself and – in a limited way – the investment opportunity (although, you should never call it that). You can then create an "info link". Then you can email them some general info and start a "relationship". Get them to join your email update list first. Then, get them to somehow ask you for a memorandum. But, again, you cannot say” anyone who wants to invest, please request a proposal”. That would be a public offering and you could go to jail. This is serious stuff! Please check with a securities attorney first or make sure you are in compliance with all your states laws. My understanding is that there is a way around this on the Internet which is interesting. Since a traditional limited partnership is considered to be a “passive” investment, i.e. the investors have no say in the running of the production and partnership, you can offer an “active” investment vehicle without having to register with SEC. An active investor is someone that is putting up money, but also helping you make decisions on the project. You can advertise for an executive producer in this way. But, keep in mind that active means active and that you may have disagreements on how to run the production. While you may or may not have to listen to them, a disgruntled investor could file a complaint if you do not treat them like an active participant. If after assembling a number of active investors you still do not have enough money to finish the film. You can convert the project to a Limited Partnership and then re- approach the active investors to see if they want to be involved as a passive investors. Since you now have a relationship with them, it is not illegal to do this. Then, you can approach other passive investors (following the laws) to fund the gap amount needed. For more info, please read this great article by noted securities and entertainment attorney, John Cones: http://www.mecfilms.com/coneslaw/memos/memo2.htm Page 24 You also need to keep in mind that you must adhere to the laws of each state that your investors are in. For example, if you are in California, and you have an investor in Nevada, you will need to research the laws of Nevada to make sure you are not breaking their laws on Securities. In all these cases, you should be able to send the memorandum after your lawyer has approved it and after the potential investors have requested it. Once you have investors who want to participate, then they will have to sign a more legal and complex document called a Limited Partnership Agreement. But, that is another report… Suffice it to say that you will most likely need an attorney to draft this agreement. However, a sample is available to download when you purchase Movie Plan Software (www.movieplan.net). Questions and Answers on Private Financing. Here are some questions that I have received from my website at www.movieplan.net. 1. How should we structure ourselves legally to proceed with getting investors and thus protect ourselves from harm? [ANSWER: The most common method is to form a brand new company specifically for the film, like "Angelic Productions". This can be a corp. or LLC. But it should have no ties to your other companies. Then, as you develop the project, you can form a development company (for packaging and financing) or a production company (for actually producing the film). These companies would be Limited Partnerships with the initial company "Angelic" being the General Partner. The first company, "Angelic Development Partners LP" can go about and raise a small amount of money from investors to further develop and package the property. These investors are in a better position than the production investors as these costs are built into a budget of a film. They do not count on whether the film makes money. They make their money back if the film is financed. And then they make money with you if the film is successful. This is sometimes very attractive to investors. This is also an ideal structure if you are going to have a third party financing company step in, like a studio. The second company "Angelic Film Partners LP" will have the script, cast and key crew positions in place from the first company's efforts. This company will raise production funds from additional investors. They can also be the same investors.] 2. How should we approach investors and yet maintain control over the casting, location and direction of the picture? [ANSWER: The nature of a limited partnership is that the general partner makes all the decisions and keeps all the control. That is why they are limited. Make sure they know this up front. They need to trust you as the general partner.] Page 25 3. How do we approach Directors, Producers and known actors to get our intentions recognized with emphasis on commitment letters etc. [ANSWERS: You have to do this the old-fashioned way. You will need to call their agents and managers and pitch the project to them. Times are tight, so there is a lot of interest in indie films these days. Just keep your aim realistic. Also, a director is the first place you should start. Actors always want to know who is directing and if you get a good one, he or she will have friends they will want to work with. If you have money attached, that will also make it easier for people to listen to you. You should also hire a casting director in L.A. to help approach these people. A good L.A. based UPM can hook you up with loads of great directors. Hiring key positions like this will help build your package.] 4. Should we approach distributors/movie production co's about buy in or collateral financing minority programs etc? [ANSWER: You should send query letters to foreign sales agents and distributors when you have a packaged project. It is important to get the feedback of the companies that know how to sell movies. After all, they know what is working in the market place. Many distributors or sales agents will write letters of intent if they like the film. Equity is a little harder. However, the right package can get interest from distributors who want rights and equity. Again, you just have to send query letters and call them. They are always looking at new projects. You can also hire a producer's rep with good industry contacts to help you pitch it.] 5. what is the sure fire (if there is one) genre being made and sold right now in the Indie feature realm in the states? If a picture were to be made, what would it be like? Subject matter, cast, action, etc. [ANSWER: There is no such thing as "sure fire". But genres that works and actually make their money back are usually of the more exploitive kind, i.e. horror, action, sci-fi, erotic. This applies for the States and the foreign markets. Right now, the "urban" genre is working well on home video in the U.S. There are low budget action pictures that usually feature a name rapper as the lead actor. Also, Hispanic action movie are taking off. Other genres that Blockbuster Video is looking for from Indies include alternative (gay & lesbian) lifestyles.] 6. Same parameters as question #1 but for international markets? [ANSWER: Action, action, action. Disaster movies. Some horror and sci-fi works. Also, family movies, especially with animals are very big in the international markets. These animal movies can be made fairly cheaply, when you think about it.] Page 26 7. A while back you had mentioned that you could possibly assist with securing distribution or at least direct me places. What do you require as a starting point for getting the ball rolling? [ANSWER: You have to have a script and cast or director first. There is also a list of companies available from www.afma.com.] 8. Straight to video: how is the deal presented to investors differently than a picture that is going to theatres. And how would I find out what a picture can potentially make going through this way of reaching buyers? What are the standards? I need to be able to know what I am talking about when talking with potential investors, especially if they are in my "soft" market, what can you tell me? [ANSWER: Straight to video movies are hurting more these days than ever before. The top renting movies are still theatricals that have grosses more than $10 million. But, if a film is made for the right budget, say a few hundred thousand and it is a marketable genre, like an urban action picture with a Hispanic and African American cast (maybe even a rapper), it could translate domestically and overseas. On a budget of $300,000 a film could gross $500,000 to $1 million. 9. Am I right to think that presenting internet sales, video rental and retail (here and abroad), and cable broadcast is enough to entice investors to invest in a picture? Or do I present a theatrical release aspect even though it may be a long shot and not really in the overall plans (with the exception of a premier in a few choice locations)? [ANSWER: You should try to include a best efforts clause where you will try to secure a theatrical distribution deal. But, you should outline the difficulties of getting such a deal.] For a complete list of reports and products available on the subject of film development and financing, please visit www.movieplan.net or email to email@example.com. Thanks. ### © 2003 Ted Chalmers Software / Chalmers Entertainment Corporation Page 27
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