Crowdfunding independent film is an excellent option for getting funding without taking on traditional debt. It can also be a perfect choice for an investor who wants high upside potential rather than a fixed payback. Both the investor and the indie filmmakers receiving the funds are betting on the project’s success, so they are very much in synch, and if they are correct, they will both be happy. The investor might wish they had asked for equity-based and financed, and the person receiving the funding wishes they had negotiated less, but that’s a good problem to have!
We provide services every step of the way regarding crowdfunding for independent film. Still, we first wanted to provide some general information about the positives, challenges, and processes regarding this approach.
Here is a list of equity-crowdfunded films. You can see that many projects have been successfully funded this way, and the variety of films listed here is impressive.
Crowdfunding Independent Film Positives
There are subtle reasons why equity crowdfunding for independent film might be a great choice:
The Crowdfunding Partnership
Crowdfunding might motivate the investor to be helpful, perhaps using their connections or knowledge or providing more funding. Motivation can be greater with a stake not only in getting a fixed payback but also in a flexible payback based on how successful the product or service is. In this way, equity-based crowdfunding feels like a true partnership. This can be a positive, almost like having a cheering squad there, hoping you’ll succeed and spreading the word about your film once it is out. This can motivate and help you realize how much your work was appreciated.
The Crowdfunding Independent Film Benefits to the Investor
For the indie film investor, crowdfunding provides a chance to have higher returns than a fixed payback. In most cases, the payback is not for a limited time, so the value can keep growing as the film gains momentum. Investors may also get perks and inside information about a product they own, which may convince them to take less equity. It can be exciting to get these updates and, in some cases, enjoy the perks of being an insider who gets early screenings, inside information, or even props.
The Benefits for the filmmaker
For the filmmaker, crowdfunding allows you not to have to pay things back right away when you may not have the funds or the financial flexibility to do so. You can use the cash for appearances, distribution, festivals, etc., without having to start making payments when you still need it. Other types of funding, including peer-to-peer lending, often require payback sooner. Also, unlike regular crowdfunding for indie film, equity-based crowdfunding does not require interest payments, which can be a burden. Instead, the equity stake goes up or down depending on the project’s success, but no interest is paid.
Equity-based crowdfunding does not have the risk that you will hurt your credit with the bank and allows you to control how much of a stake you give up in your project. Traditional funding can lead to the bank or other lender taking an outsized portion of your assets if you cannot make payments.
Crowdfunding Independent Film Drawbacks
Of course, there are some drawbacks too that we should mention here. For example:
Crowdfunding for Independent Film Does Not Guarantee Payback
When an investor puts money in, there is no guarantee that they will get any return, given that the project may not return enough money. You could be left with some frustrated investors who let you know it. This may hamper your ability to crowdfund for your next film and create bad buzz around your project. This is one reason you may want to build up a track record, perhaps starting with a short film or two to show your abilities or starting with a friend and family-funded project.
You May Give Away Too Much Equity
Equity-based crowdfunding presents the possibility that you will give away too much equity when your film does exceptionally well. Of course, often, this problem is outweighed by the fact that you are happy about your film’s success, but sometimes the equity stake given up is too much. There is a delicate balance when you decide how much equity you’ll give, but it helps that you can look to other projects similar to yours to see what equity they agreed to. This is also the homework that investors do. The basic crowdfunding independent film split is that investors first get between 110-125% of their investment back, and then you split the profits.
Confusion About What is “Profit”
Crowdfunding independent film can lead to confusion about what exactly is due to the investor. Aspects of the funding, such as how much profit can be paid to people involved in making the film before the equity shares are paid, must be negotiated beforehand. There are caveats, such as how much you pay non-actors – it is accepted that you do have to pay the talent and most of the crew, but do you pay yourself and others in high-level positions a salary, or are you taking on the same risk as investors? This needs to be clear upfront.
Crowdfunding Independent Film Timelines
Crowdfunding can tie up the investors’ money for an extended period while they wait for returns. Investors in crowdfunding for independent film might think there will be a simple one-time release, and money will flow in, but that’s not always the case. You should make sure to educate investors about the process and likely timeline. Let them know how long it might take to get the film out to festivals, for example, to get notice and buzz. You must balance attracting investors and being upfront about how long it may take to get a return.
Crowdfunding for Indie Film Conclusion
Remember that you can combine different types of crowdfunding for a perfect mix and even combine crowdfunding with traditional funding. While equity-based crowdfunding alone may provide the right fit for some investors, a combination approach may work well, too. On the positive side, crowdfunding offers a confidence boost, not only for the filmmaker but also for others considering an investment. The fact that an investor feels so confident to provide this kind of at-risk funding can motivate others.
Crowdfunding may also help with your future endeavors – not only might you have a group of happy initial investors who want to continue to support you, but you also have a track record of being able to use this funding method well.
Our Work with Crowdfunding for Independent Film
These are just a few general positives and drawbacks of crowdfunding for independent film from both the project and the investor side. There could be other unique advantages and disadvantages to equity-based crowdfunding for your project, and we are here to help. Our services can help you connect with platforms that are a good fit for your project, decide how much equity to give and the details of the investor agreement, and how to design and describe timelines and other information.
We’d love to hear from you about your project and your goals. Once again, we do not take any money up-front, and our services never take any control of anything related to the production of your film!
