RSSHow do I prepare a prospectus and/or investor memorandum for my film?
Internet Filmmakers' FAQ
Getting investors onboard your film is perhaps one of the most difficult aspects of the filmmaking process, and also one that can be fraught with many risks. Indiewood lore is of course full of stories of filmmakers who begged, borrowed, or proverbially stole the money to make their films... stories which of course end in box-office gold or Sundance glory. But for every “Brothers McMullen”, “El Mariachi”, “Clerks”, or “Blair Witch Project”, there are at least 10 miserable failures – stories of filmmakers who poured heart, soul, and comparatively plenty of cash only to be left with an expensive tin of celluloid that nobody wants.
Placing money in independent films is one of the riskiest investments anyone can make. So when you are looking to get investors onboard your project (particularly people who are outside your circle of family and friends) it’s essential that you take a professional approach and set realistic expectations for the potential risks and rewards. The best way to do this is to prepare a business plan or prospectus which outlines what is required to produce the film and how you are going to generate enough money from it to repay your investors (hopefully with a little profit too).
When preparing any kind of business plan, it’s essential that you take realistic view of what is achievable and what the likely return is. Don’t include information that you aren’t fairly sure is true (e.g. don’t suggest you might get Tom Cruise to do a cameo if you don’t have his personal phone number), and never use figures that can’t be substantiated by a credible third-party source (i.e. box-office figures). If you get your investors onboard using misleading information it can simply result in a world of pain later down the track when they find out (particularly if your film generates any significant revenue). There are plenty of examples of filmmakers being sued by their investors, either to recover profits they believe they’re owed or to return the original funds due to a belief that they were mislead into providing them (e.g. check out the results for this Google search on two filmmakers who were sued by their investors over the commercial viability of a documentary on 2005 US presidential candidate John Kerry).
In terms of preparing a business plan, there are several good books on the subject, some of which include sample plans and discuss ways to approach investors and the potential pitfalls in full detail (see the recommended reading panel at the bottom of this page). It’s worth remembering that whilst it’s absolutely fine to approach potential investors privately, in many countries it’s actually illegal to publicly solicit for investors for any commercial enterprise without going through approved channels. For this reason, and those previously discussed, its always advisable to get a qualified entertainment lawyer to look over your investor plan and agreements prior to anything been finalised. Whilst this may feel out of keeping with the indie filmmaker spirit, the reality is that if you can’t afford some minimal legal fees you probably shouldn’t be trying to get investors involved in your project.