Equity crowdfunding platform Syndicate Room has shared an interesting depiction as to how investors in a film may enjoy some healthy returns. Of course this is all predicated on the fact the film is a decent production (although we all know a lot of bad films make a lot of money).
Syndicate Room listed this interesting investment opportunity this past July. Well known and highly successful Director / Producer Simon West signed up to skip the Hollywood film funding routine to take a swing at using crowdfunding to help produce his next film. One of their investors actually tipped them off to investment crowdfunding and they liked what they heard.
We all know the big name productions that have experienced crowdfunding success like Veronica Mars and Zach Braff’s Wish I Was Here (not to mention Blue Mountain State). But these were rewards based productions where a backer received a poster or a t-shirt etc. West is allowing backers to purchase equity in the production. While his film investment opportunity is not the first to go the equity crowdfunding path he is one of the first and a really big name with tons of connections. West is someone who had to decide between directing Black Hawk Down and Tomb Raider. Lara Croft won out – you can be the judge of that decision. Well West is funding a new production called Salty on SyndicateRoom and he is looking to raise £1.8 million for a 14.49% ownership stake.
Salty is described as a story that is Spinal Tap meets The Hangover all packaged up in that keen British humor we love. Think burnt out rock star, super model wife, trip to Thailand and an abduction by pirates. Salty is based off a “hilarious” book that West adores. The production team believes they have a huge commercial success on their hands – they just need the funds to put it all together.
So the story premise may be fantastic but what about potential investors? Syndicate Room has outlined how the revenue will go using a base box office number of $50 million (West’s last films topped $60 million each).
In brief after expenses and contingent up the equity participation, investors will receive 25% of the profits. This is after equity investors are repaid. Their modeling indicates that investors will generate a 167% return. Of course there are no guarantees to that. The rest is divvied up between West and the talent.
a) 25% of profits goes to investors
b) 25% of profits goes to Simon West and Producers
c) 50% of profits goes to Talent to attract top movie stars.
Now I am assuming profits means in perpetuity. As many people know films have an extended life after distribution on the big screen with NetFlix, iTunes etc.
Now the the equity crowdfunding portion is only for £1.8 million minimum and the film needs quite a bit more to get going. The rest of the sum required is expected to be in pre-sales to distributors (once the lead actors are determined) and apparently up to 40% of a film budget may be made up by “incentives”. These incentives are tax credits that many locations offer up to get the film made in their cities and towns.
Investors in Salty do not get voting shares but they do get equal participation otherwise.
Now this is but one model for film funding and there are very many more. If you are interested in additional details simply register on the SyndicateRoom and pose your questions to West and his team.
Salty may be the first Hollywood type film that uses equity crowdfunding to help finance the film. The project already lists 39 investors, having raised a bit over £600,000 but they still need another £1.2 million to call it a day.