By: Anjana Puri
As many filmmakers know, it takes a lot more than a strong screenplay, powerful cast and innovative artistic vision to take a great story from paper to the big screen. So, what is the magical movie-making ingredient? MONEY, pure and simple.
Luckily, there are several ways to finance your film, such as loans, investments, donations and grants. Here, we are going to focus on how to secure investments for your movie.
Investments as Securities
Generally, an investor will help fund your creative project in return for a portion of the film’s proceeds. This type of investment is considered a “security” – a financial interest in which the investor expects to receive some sort of profit.
You’ve probably heard this term used when people talk about investing in companies on the stock market. Those deals are highly regulated by the Securities Exchange Commission (“SEC”), the federal body that protects the public from pouring their hard-earned money into faulty investments. These types of securities must be “registered” with the SEC, a legally complex and expensive process.
Fortunately, within the film industry, investments in movies aren’t typically offered to the general public, but are often pitched to specifically targeted, wealthy and financially sophisticated individuals (aka “accredited investors”). These initiatives may be considered “private placements” and do not need to be registered with the SEC. However, even though private placements are excused from registration, you still need to file exemption paperwork with the SEC – most commonly Form D. But bear in mind filing Form D is only half the battle, as it only satisfies federal statutes.
State Securities Requirements
Filmmakers also need to comply with state securities laws, commonly known as “blue sky laws.” These laws vary by state, so it’s very important to adequately research the requirements. Tip: research the blue sky laws of the state where your potential investor lives. Generally, laws will require you to submit a copy of your Form D, a state-specific form and a fee.
A Word to the Wise
Keep in mind that Form D, blue sky filings and the related investor paperwork are complicated legal documents that need to meet strict standards. These requirements will vary widely depending on whether the investors are accredited or sophisticated.
If you are going to use investments to fund your film, it’s incredibly important that you follow the federal and state securities laws to the tee. Consult with a legal professional who is familiar with these regulations to make sure you’re doing it right. Failing to follow investor rules can have disastrous legal consequences not only for your film, but also for you personally.
That being said, investments are a popular and effective way to obtain funds for a film. Approaching the right investor, the right way, can raise more money than any other form of fundraising.