Updated: October 6, 2021
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. In this article, we will focus on how to secure investments for your movie.
Generally, an investor will help fund your creative project in return for a portion of the film’s gross profits. 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 public companies on the stock market. The Securities Exchange Commission (“SEC”), the federal body that protects the public from pouring their hard-earned money into faulty investments, heavily regulates these types of investments. For example, These types of securities must be “registered” with the SEC, a legally complex and expensive process.
Fortunately, investments in the film industry aren’t typically offered to the general public. Instead, film investments 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.
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 diligently 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.
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 essential that you follow the federal and state securities laws to the tee. While it is not legally required, consulting with a legal professional who is familiar with these regulations to make sure you’re doing it right is typically the best option. Failure to follow investor rules can have disastrous legal consequences not only for your film but also for you personally.
Private investments are an increasingly popular way to obtain funds for a film. Approaching the right investor, the right way, for your project can raise more money than any other form of fundraising. As you work to finance your next film, it is imperative that you be mindful of federal and state requirements and seek proper counsel when necessary.