Bank Roll, 2nd edition by Tom Malloy...sample pdf

BANKROLL A NEW APPROACH TO FINANCING FEATURE FILMS

2ND EDITION

TOMMALLOY

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CONTENTS

Acknowledgments viii

Introduction ixUpdatefromIndiewood xvi

Part I – Getting Started 1

Chapter1:WelcometoIndiewood 3

Chapter2:WhyYouNeedThisBook 33

Chapter3:WhatNoOneElseCanDo 39

Part II – Prepping the Project 47

Chapter4:SellingYourselfontheProject 49Chapter5:CreatingtheBusinessPlans 59

Chapter6:PracticingthePitch 83

Chapter7:SummingUp–TheFiveSteps 95

Part III – Funding Your Film 97 Chapter8:FindingtheMoney 99

Chapter9:StartingtheTrain 109

Chapter10:TheTen-ArmApproach 119

Chapter11:TheVestedInterestApproach 125

Chapter12:TheNetworkingApproach 131

Chapter13:TheFinder’sFeeApproach 135

Chapter14:TheDistributorApproach 145

Chapter15:TheAttachmentApproach 153

Chapter16:TheDangerousApproach 163

Chapter17:TheStructuredApproach 169

Chapter18:TheLawofAttraction 175

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Chapter19:GettingItDone 181

Chapter20:Closing 185

Chapter21:TheSpecialTips 189

Chapter22:ANoteontheFutureoftheFilmBusiness 195

Chapter23:TakingAction! 199

AppendixA:NewSampleBusinessPlan 201

AppendixB:BooksforReview 213

AppendixC:WebsitesandOtherResources 215

AbouttheAuthor 217

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UPDATE FROM INDIEWOOD

“Unless you continually work, evolve, and innovate, you’ll learn a quick and painful lesson from someone who has.” —CaelSanderson

Well,thingshavechanged.Bankrollwaswritteninearly2008,and,withonlyamerethreeyearspassing,theindustryhasmorphedintosomethingdifferent.TheprimaryreasonforthischangehasbeenthebankingcrisisofSeptember2008.Moneyseemedtodryupevery-where. Itwasn’t that investors didn’twant to invest… it’s that theycouldn’t.Italsocreatedageneralfearasfarasinvestingmoneygoes.Thatfearstillexiststoday.

SomanydealswerefundedbyHNIs(“HighNet-WorthIndividuals”)usingbankloans.IpersonallyhadtwosignedcontractsforfilmsinAugustof2008.Bothfellapartamonthlater.

Theforeignsalesmarketalsocrashedsomewhat,aswellastheDVDmarket.Iusethisstoryasaprimeexample:Myfilm,Love N’ Dancing,wasreppedbyafantasticforeignsalescompanycalledVoltagePictures(theyalsoproducedThe Hurt Locker).Oneoftheterritoriestheyini-tiallyhadtroublesellingwasFrance.Theprojectionsforthisterritorywere$400,000onthehighside,$250,000medium,and$125,000low.

A few months after September of 2008, I got a call fromVoltagePictures.Theyhadfinally soldFrance…for$30,000. I turnedpale.“$30,000?That’slessthanaquarterofthelowestprojection!”ThentheyconveyedtomethatamajorAmericanfilmwithamajorstar(Iwon’tsaythenameandembarrassthefilm)gotabigfatwhopping$0fromFrance.Didthatmakemefeelbetter?Notreally.

Sothis“StateoftheUnion”hasbeensomethingI’vehadtodealwith,ashaseveryoneelseinIndiewood.IremembertalkingtoafriendattheAFM(AmericanFilmMarket)lastyear,andwebothjokedthattherearetwoprofitabletypesofmovies:oneswithbudgetsover$100million,andoneswithbudgetsunder$1million.Thedaysofthemid-range$5-6millionfilmsaregone.

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Andwhyisthat?Well,besidestheforeignsalesmarketbeingreducednottohalf,butmaybeto1/5thor1/8thofwhatitusedtobe,theDVDmarketisjustasbad!Who’sbuyingDVDs?Thinkaboutit,andthinkaboutthefuture.Mostpeoplewillhaveset-topboxesintheirhousesandwillbeabletostreaminstantlywhatevermovietheywanttowatchatanytime.WhypurchaseDVDs?Whyrent?Blockbusterhasfiled for bankruptcy, andNetflix streaming is thewayof thefuture(fornow).Theatersarehangingontotheonelittleadvantagethey can muster against home viewing, which is 3D. Go to anymovieandyou’llsee90%ofthepreviewsforupcomingfilmsarefor3Dfilms.IlovewhenIseeatrailerfora3Dmoviethathasnobusi-nessbeing3D!Trustme,IgetitforGreen LanternorThe Avengers,butwhenthenewDianeLaneromanticcomedycomesoutandit’s3D,something’swrong!

I speak about film financing around the country and around theworld.WhenIstartmyseminarswiththisinformation,ittriggersageneralmalaiseintheaudience.ItrulywishIhadtheguts(orlackofethics)tomakeeverythingsoundbrightandsunny,butIcan’t.We(theindependentfilmcommunity)areallhopingitturnsaround,butthehardtruthisthatsomethingswillneverbethesame.

Yet,there’sagoldenopportunityherethatIwanttomakesureyoudon’tmiss.Moviescanbemadenowforclosetonothing.A-listandB-liststarswhomayhavemade$500,000to$1millionapicturearenowmaking$50,000to$60,000.That’sanopportunityforyou!IlookatthefilmsIhavemadeinthepastandIknowIcouldmakethemnowforperhapsaquarterorevenafifthor sixthof theiroriginalbudgets.IfImadea$1millionfilmfiveyearsago,itmightlooklikeaglorifiedstudentfilm.ItwouldhavesomeC-orD-liststars,andbefilmedwithamostly inexperiencedcrew.Today,that$1millionbudgetcangetyouwhat$5or$6millioncouldhavegottenyoufiveyearsago.

For simpleevidenceof this, look to television.Majorfilmstars arenowdoingTV.Why?Becausethat’stheonlyplacewheretheystillgetasalary.TheindustrygulpedwhenScarlettJohanssenwasoffered$250,000 for Iron Man 2 (Ibelieveheragentsnegotiatedherup to$400,000).Thatwouldhavebeen$8millionamerefiveyearsago.It’s

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asifstudiosgotsmart.Actorsandcrewwerebeingoverpaid,andthatbubblehasburst.Willsalariesgoupagain?Perhaps.Butmostlikelytheywillbesmallerthantheyoncewere.

So that’s a golden opportunity for you as a filmmaker.You maybeabletogetafantasticdirectorandstarsthatyouneverthoughtwerepossibleifyoucanjustclosethefinancing.Forme,that’sthemonsterbonusthatthischangeintheindustrycreated.Findmoney,andyouhavearealproject.Arealprojecttodayisrareandamazingandwillattractsomuchmorevalue(i.e.,talentandcrew)thaninprevioustimes.

Unfortunately,noteveryonehas seenthe light.Manyfilmmakers,actors,andcrewarestilllivingin2005.EverythingI’vesaidsofarinthisupdatecanbebackedupwithhardevidence.Yet,manystillthinkthattheycancommandthesamesalariesandfeestheyreceivedbackwhenthingswererockingandrolling.It’snotonlyridiculous,it’sdangerous.

Let’ssaythatyouwereabletoraise$2million,andyoucastafilmwithsomeC-liststarandano-namedirector.That$2millionfilmwillmostlikelymakeabout$100,000fromforeignsalesanddomesticDVD.Isthatwhatyouwanttohavetoexplaintoyourinvestors?

Recently, Iwashired todo a rewriteon a $500,000flick.By thispoint,I’dstartedtoseethelightthat$500,000isarespectablenum-berandagreatfilmcanbemadeatthatpriceifthescriptiskiller.Unfortunately,theproducershiredaformerstudiodirectorwhowasstill livingin2005.HeandIhadaphoneconversationaboutwhathewasdoingwiththefilm,andhecomplainedthat$500,000waswaytoolittletospendonafeature.Hewasplanningtohireinternsandstudentfilmmakerstobeinvolvedwiththeproduction,becausehedidn’trealizethat,intoday’sworld,hecouldbehiringlegitimate,experiencedtalentona$500,00budget.Ireallywantedtophonetheinvestors andwarn them that thisdirectorwouldbeflushing theirmoneydownthetoilet,butitwasn’tmyplace.Itwasn’tmyproject,andpeoplearegoingtomakemistakeswiththeirmoney.

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IconveyedallthisinaseminarIrecentlyled,andsomeoneraisedhishandandasked,“Isthereanygoodfromthis?Iwanttohangmyself!”Myresponsetohimwasthatthereissomuchgoodfromthisifyoulookintherightplace.IfImadea$3millionfilmanditturneda$1millionprofit,thatwouldbeaincrediblefailure.Yet,ifImadethatsamefilmfor$500,000,thatmoviewouldhavedoubleditsinvestment.Here’swhatI’mtellingyou:Itcanbedone!

I’mgonnaadviseyourightnow.Ifyouareworkingwithanyactor,producer,director,lineproducer,oranyothercrewwho’s“livingin2005”andthinkshis/hersalaryshouldbetheequivalentofwhatitwasbackthen,dropthatpersonimmediately.Thatpersonisgoingtosteeryoudownaroadtoruin.Twofriendsmadefilmsrightaroundthetimetheprofits felloffacliff.Bothhadteeny littlestars,andbothdidn’tevenmake$200,000fromsales.Eachfilmwasbudgetedatalmost$4million.That’sscary.

Sotakethisopportunityand loweryourbudget!Finda linepro-ducerwhoknowsthe“StateoftheUnion.”Makeafilmforunder$1millionandmakeitlooklikea$5millionfilm.ThosearefilmsthatIwanttomake!

Beware of Microbudgets!

EveryonewantstomakethenextParanormalActivity.Soundsgreat,right?A$15,000filmthatmakes$100million?Understand,however,that those films are winning lottery tickets. Filmmakers, however,don’tgetthat.Theyimmediatelytrytomakesimilarmoviesandhopeforthebest.I’mnotsayingIwouldn’tmakeafilmlikethatasanex-periment(andI’mnottalkingabout$15,000–morelike$100,000),butthat’swhatitwouldhavetobe.

Whynotmakeafilmwherebudgetisn’tthemainsellingpoint?In-steadof“Doyouknowhowsmallthebudgetwasonthisfilm?”getpeopletosay,“Didyouseehowgreatthisfilmwas?”That’sthekindoffilmIwanttomake,andthat’sthekindoffilmyoushouldmake.Usethis“StateoftheUnion”andmakeamovieforapricethat’srea-sonable.Then,ifyour$600,000filmlookslikea$5millionfilm,youhaveachancetoknockoneoutofthepark.

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Chapter Two

Why You Need This Book

What Do You Have? Youmayknowpeople.Youmayhavefriendswhoareactors.Youmay have friends who are storyboard artists, experienced DPs,ADs,orlineproducers.Youmayevenhaveaconnectionwithaprestigiousfilmproducer.Youalsomayhaveakillerscript(moreon that inChapter 4: SellingYourself on theProject).Youmayhavefreelocations,freeequipment…evenfreefilm.

Butyoustillneedmoney.

Attheendof theday,all thatmatters is“gettingthegold.”Thegolden rule of Hollywood is “He who has the gold makes therules.”Iheardthatexpressionafewyearsagoandhavecometorealizethatthere’snothingtruerinthefilmbusiness.Tomakeyourdreamofafilmareality,youneedmoney.

The Other Books

Overthecourseofmylife,I’verunintoseveralbooksthatprom-isedtorevealthetricksandtradesusedto“financeyourfilm.”Theonethingthesebookshadincommonwasthatwhenitcametothenitty-gritty,theyallfailedme.

Sure, the bookswould tell youhowother people have done it,describing“negative pickup deals,” and“bank financing,” but Ikeptthinking,“HowdoIdothat?”It’snoteasyforafilmmakertojustwalkintoSonyandsay,“Hey,canIgetanegativepickupdealformyfilm?”Thefunnythingis,ifyou’reatallfamiliarwithnegativepickupdeals,you’dknowthat,evenifyouhaveone,youstillneedfinancing!

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Ikeptsearching,hopingoneofthesebookswouldrevealthetruesecretastowheretogetthemoneyandwhomtogetitfrom.Somanyofthebooks,includingonewhoseentirefocusistoshowthe reader how to write a perfect business plan, consigned themost important elements — the how and the where — to thefilmmaker.Iwasdumbfounded.Ihadmyperfectbusinessplan,sonowwhat?IhadstoriesofhowKevinSmithgothisfilmmade(bymaxingouthiscreditcards),sonowwhat?Isthatwhatyouwantmetodo?Isthattheonlywaytomakeafilm?

Iattributethislackofknowledgetotwopotentialproblems:

=Mostof thepeoplewriting theotherbookshaveneverfundedafilm.Theywereperhapslawyersinvolvedwithdrafting the documents for funding, or they schooledthemselvesineveryaspectofhowfilmsarefundedtra-ditionally,buttheythemselvesneverwentoutandraisedmoneyforafilm.Or…

=Theydidn’twanttotrulygivetheirsecretsaway.Letmeexplain:

Peopleinthefilmbusinessconsidermoneyacommodity.IfI’mtellingyouthat,attheendoftheday,moneyisallthatmatterstoafilm,doyouthinkthatapersonwhoknowswherecashcanbefoundwilljustgiveawaythatsource?Hellno!

People with HNIs end up protecting them like a mother lionwouldprotecthercubs. I’mguiltyof it aswell, and Imakenoexcusesforit.I’vegottenintoscreamingmatcheswithpeoplewhotriedtocontactmyHNIsbehindmyback.I’vecaughtpeopletry-ingtostealmyinvestorsred-handed.TheHNIfundstheprojectsthatfeedmywifeandkidsandpayformyhouse.Whywouldn’tIwanttoprotectthatperson?

I’vealreadymentionednon-circumventagreementsandhigh-levelrelationships.Producersclingtotheirmoneypeoplejustlikesuc-cessfulsalesmenclingtotheirtopclients.Whatamazesmeisthat,inotherbusinesses,ifyoustolesomeone’sclient,you’dbethoughtof as a horrible person. If you steal someone’s client or money

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personinthefilmbusiness,you’dbeconsiderednothingshortofnormal.Ithappensallthetime.MyproducerfriendIsenrelayedagreatjokeaboutthefilmbusiness:

Q:“Howdoyoutellthedifferencebetweenyourfriendsanden-emiesinthefilmbusiness?”

A:“Yourfriendsstabyouinthefront.”

The Most Important Thing to Learn

Thesinglebestthingyoucandotoraisemoneyforafilmis:

Stay away from anyone who is associated with the film business.

IonceheardanentertainmentattorneyfromChicagoputitbest:“Youwantmoneyforfilms,getouttaDodge!”

Nowletmetellyouwhy.SinceI’mnowconsideredveryskilledatraisingmoney forfilms, I getpitches coming tome all the time.Peopleaskme,“Canyouraise$3millionformyfilm?”Let’sforget,foramoment,themeritsoftheirprojects,oranyotheraspectsoftheirfilms.Let’sjustsayIhadanHMIwhowantedtoinvest$3million.DoyoureallythinkIwouldgivehimorhertosomeoneelse?Ofcoursenot!Iwouldgethimorhertogivemethe$3million!

Thislessontookmesolongtorealize.Trustme,Iwasontheotherendformanyyears.Iwouldpitchpeopleinthefilmbusinessallthetime,hopingtoraisemoney.Whilesomeenjoyfundingotherprojectsanddon’twanttobeinvolvedcreativelyatall,mosthavetheirownagendas.Theonlyexceptionistheproducerwhohap-penstobelookingfortheexacttypeofprojectyou’redeveloping.Forexample,sayyouhavearomanticcomedy,andthat’swhattheirfinancier alsowants—but the producers only have a dramaticpieceattheready.Thisscenarioistheexceptiontotherule;themajorityofpeopleinthisbusinessareonlyouttohelptheirownprojects,andIdon’tblamethem!

WhileattheAFMinSantaMonicaafewyearsago(moreontheAFMinChapter14:TheDistributorApproach),Iwasinalunchmeetingwith a guy Iwas approaching for funding forLove N’

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Dancing.As Iwasdiscussingwhatweneededbudgetwise, Ino-ticedhewashalf-listening.Ithrewoutthenameofanactresswewereconsideringfortheleadrole.I’mnotgoingtosaywhoitwasexactly,butlet’spickafamousmoviestar:CharlizeTheron.IsaidwewereconsideringmakinganoffertoCharlize,andhiseyeslitup.Suddenlyhehadcometolife!Heturnedtomeandsaid,“Hey,Ihaveaprojectthat’sperfectforher…doyouthinkyoucangetherthescript?”Inthatonesecond,Irealizedthatthisguy,evenifhehadmoneyconnections,wouldalwaysputourfilminsecondposition.Hewasgoingtoworryabouthisfilmsfirst.

I’veheard it happendozensof times.Anotherfinancier friendofmineconveyedastoryaboutmeetingwithsomeWallStreetinvestortypestopitchaslateofprojects.Inthemiddleofthemeeting,theWallStreetersaskedhim,“Well,whatifwehadourownscripts?Doyouhaveways tofinance those?”Herewasmy friend, in ameetingwithpeoplehethoughtwereinvestors,andtheywerepick-inghisbrainabouthowheoperated,andeventuallywereaskinghimforfinancing!

Another friend (and this is oneofmy all-time favorite fundingstories)had,onhisown,raised$500,000fora$1millionfilm.Hestartedgoingouttopotentialfinanciersinthefilmbusinesstoseeifhecouldraisetheother50%.Hispitchwasthathehadthefilmhalf-financed,andheonlyneededtheremainder.Well,hestartedputtingoutcalls,andthepeoplehecalledputoutcalls,andsoon,untilafewcallscamebackin.Oneinvestorclaimedhecouldputup50%.Myfriendthoughtthatwasgreat,untilherealizedtheso-calledinvestorwastalkingaboutthe50%thatmyfriendhadalreadybroughttothetable.Hewaspitchingmyfriendwithhisownmoney!

People inHollywoodareonlyconcernedwith theirowncareers,and I don’t blame them.Thefilmbusiness is incredibly tough. Ifsuccessful people in the industry don’t want to help you, it’s notnecessarilybecausethey’rebad.Theyaremorethanlikelyjusttryingtohelpthemselves.

About ten years ago, a friend of the family won the AcademyAwardforBestOriginalScreenplay.Hewasthehotwriteratthe

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time(andstillis),andhewantedtotakeashotatdirecting.Sothestudiosgavehimalow-budget(bystudiostandards)filmtodirect,thatcameinatabout$15million.Thefilm,unfortunately,bombed.Iwasactuallyabigfanofhisdirectingeffort,so,afterafewyears,IapproachedhimtohelmThe Alphabet Killer.Heemailedmeex-plainingthathecouldn’tgetajobdirectinginthistownifhetriedandthathewouldonlybeanalbatrossandanobstacleifIattachedhimtomyscript.

MyfriendhadwonanOscar!Hewasontopoftheworld,right?Wrong.HisOscarand$1.95couldbuyhimacupofcoffeeatthelocaldeli,asfarasdirectinggoes.(Writingwise,though,hemakesmillions, so don’t feel too bad for him.)That’s howquickly thisbusinessforgetsyou,writesyouoff,ortossesyoutotheside.Now,knowingthat,can’tyouseewhypeopleonlywanttohelpthem-selves?Theyhavetopaymortgages,rent,andbuyfoodfortheirkids!Evenifyouweretoofferthemgenerousfinder’sfees,it’snotgoingtohelptheircareers.Sousingsomeoneintheindustrytotrytofundyourfilmisamistake.Youmustrememberthat,whoeveryourindustryfriendsare,theyarelookingoutforthemselvesfirstandforemost.

Who Has Funded My Films?

Where have I raised my private equity money?Well, the mostsignificant sources were a commercial furniture salesman fromNewJersey;aWebmasterfromupstateNewYork;aprofessionalpokerplayerfromLasVegas;amarketinggurufromArizona;andaguyfromupstateNewYorkwhoseunclewasontheForbes400list. None had anything remotely to do with the film business,exceptthattheyalllovedwatchingmovies.

Peopleoutsidethefilmindustrywantin.Theywanttohavestars’cellphonenumberssotheycancallthemasfriendsandsayhello.Theywanttogooutdrinkingwithamoviestartheyidolizedinthepast.Theywanttobe“intheclub.”SuccessfulpeopleinHollywoodarealreadyintheclub,sopitchingthemyourfilmisonlyanotherway of asking them to help you gain admission.All the while,they’retryingtoretaintheirownmembership.

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Keepinmindthatbypitchingapersonoutsidetheindustry,youareofferinghimorheraway in.Imakesuremyfilminvestorsgetwhat theywant.Allfiveof thepeople I justmentioned arenowproducingmultipleprojects.Andall fourhavemovie stars’cellnumbersprogrammedintotheirphones,duetomy“lettingthemin.”

This Book

Thisbookwilltellyouhowtotakethatideathat’sfesteringinyourheadandturnyourdreamintoareality.Itismyintentiontotakeyouthroughthestepsthatarethemostimportanttogettingyourfilmfinanced.Iwillnotkeepanysecrets.IwilldivulgeallIknowaboutwhere,when,andhowtofindthemoney.Ifyoufollowthesteps,Iknowyouwillbesuccessful.

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Chapter Three

What No One Else Can Do

How Valuable Are You? Understandthis:Ifyoucanraisemoneyforafeaturefilm,youhavejust separated yourself from 99% of independent film producersworkingtoday.That’showvaluableyouare.

AfterImadeThe Atticcometofruition,Iwasallowedintoanexclu-siveclubcalledTheCircuit, agroupof themost successfulpeopleworkinginindependentfilminNewYorkCity.TheCircuitconsistedofproducers,writers,anddirectors.Actorsandactresseswerebanned(Iguessnoonewantedthemshowingupaskingforjobs).

The Attic’sElisabethMoss,CatherineMaryStewart,andmeinacalmscenebeforethestorm.

PhotobyScottSloan

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Itwas a reallygood idea thoughtupby agreat guynamedMarkGrande,whowas,atthetime,theheadofHowardStern’sproductioncompany.

TheCircuit’sgoalwasformemberstomeetonceamonthandnet-workwithothersuccessfulpeopleinIndiewood.

Iwassoexcitedatfirsttobemeetingallthesepeople.Someweredirectorswhohaddonemultipleprojects.Somewereproducerswhohadoveradozenfilmsundertheirbelts.Isoonfoundout,though,thatallofthemhadonethingincommon:Theyallwantedmoney.Ialsodiscoveredsomethingelse:Noneofthemhadanyideahowtogetit.

Now,pleasedon’ttakethisthewrongway;IstillthinkTheCircuitwas(andis)agreatwaytonetwork,andifyouhaveenoughcreditsandclouttogetin,goforit.(I’veincludedtheirinformationattheendofthebook.)Also,Ihaven’tbeentoameetinginyearsbecauseImovedtoLosAngeles,soIcannotattesttowhoattendsnowadays.IjustwanttonotethatwhenIwasgoingtomeetings,IspokewithsuccessfulIndiewoodpeople,andtheystillwereallsearchingforthegold.Eventhetoppeoplecan’tfindit!

Atthetime,Ihadonlyraisedfinancingforonefeaturefilm,The Attic,buttherewerestillpeopleinTheCircuitverymuchinterestedinmebecauseIhaddoneWhatNoOneElseCanDo.MyproducerfriendIsenRobbinsputitthisway:“Tom,you’vebecometheprettygirlwhoeveryonewantstotaketotheprom!”ThisishowvaluableandimportantbeingabletofinancefilmsisinIndiewood.

Another story: I hadwritten an action script thatwas passed onthroughsomeconnectionstoapairofveryexperiencedproducers.WhenIsay“veryexperienced,”Imeanthattheyhadbothproducedsomeofthemostsuccessfulfilmsofalltime.Theyreadmyactioner,andtheycalledmeinforameeting.Turnsoutthatmyviolentac-tionthriller(thefirstoneIhadwritten)didn’tmeettheircriteria.Infact,thethrillerwassoviolentandquirky,thatitmaynevergetmade,butithashelpedmeimmenselybecausethewritingissomeofthebestI’veeverdone.

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Thesetwoproducerstoldmehowmuchtheyadmiredmywritingskillandwouldlovetofindawaytoworktogether.Iwouldhavebeenelated,exceptforthefactthatthecompanytheyworkedfor,oneofthemonstermini-majors,hadrecentlyclosedupshop.Theycouldn’tpaymeanything,buttheydidtellmethattheywerelook-ingtoputtogether$100millionforafilmfundandmighthaveitcompletedbytheendoftheyear.

Then, following a little awkward pause, they turned to me andasked,“So,Tom, how did you finance all of your films?” I wasflabbergasted.Thesegiganticproducerswereaskinglittleol’meforadvice.Trustme,ifIgaveyouthelistofcreditsbetweenthesetwo,yourjawwouldhitthefloor.Theproblemwas,theywerealwaysusedtohavingstudiomoneyattheirdisposal,andnow,facingtheindependentroute, theywere searching foranyadvice theycouldfind.Amazing.Istillhavetheutmostrespectforthemandamstillhopingtheycangettheirfinancingsowecanworktogether.

Again, it justgoes to showyou that ifyoucanget thegold,youbecomearareandinvaluablecommodity.

What Everyone Will Tell You

Nowhere’stheproblem.Thisissomethingyoushouldwatchoutfor:Alotofpeoplewilltellyoutheycanraisemoneyforfilms.Almostallofthemarefullofit.Ittookmealongtimetolearnhowtoqualifymoneypeople,and,inthischapter,IwillimpartallthetechniquesIknow.

ThefirstthingIwilltellyouisthatyouhavetotakethesamestepswitheveryone—noexceptions. Idon’t carewhat thepotentialfinancier looks like,orwhatheor she iswearing,orwhereyouaremeetinghimorher.While99%ofthesepeopleyoutakethestepswithwillgonowhere, thatfinal1%willmakeyourdreamcometrue!

Ilearnedthislessonthehardway.IwasataChristmaspartyatacelebrityfriend’shouse,andmywife,who’ssocharmingandfriendlythatsheactuallydoublesmypitchingpowersjustbybeingbymy

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sideatparties,wastalkingtoacasuallydressedmanwearingpennyloafers.Mywifetuggedatmyarm,“Tom,youshouldmeetthisguy.Hefinancesfilms.”Itwastheholidayseason,Iwashavingfun,andthelastthingIwantedtodowastalkbusiness.Ontopofthat,mycelebrityfriendhadmorecelebrityfriendscomingoverandIwasexcitedtomeetthem.Also,Iwasjustsosickofpeopletellingmethey“financefilms”thatIsimplydidn’tfeelliketakingthepropersteps.So,tomakealongstoryshort,Iblewtheguyoff.

I’msureyoucanseewherethisisgoing.

HeturnedouttobeoneofthepeopleontheForbes400list.HealsofoundedoneofthebiggestInternetcompaniesintheworld(Iwon’tmentionthename,butlet’sjustsayit’spartofallofourvo-cabulariesnow),andhehadfundedabouttenfilms,threeofwhichwerenominatedforAcademyAwards.Ughh.

That little lesson served as a reminder to me to follow up witheveryone!SoI’mstartingthispartofthechapterwithawarning:Always take the steps. If theperson turnsout tobea fake,call itpracticeforyouandyourpitch.

What to Watch Out For

Thephrase that everyone in thefilmbusiness uses to qualify aninvestoris“Isheorshereal?”Theword“real”istheultimateas-sessment.I’vegottentothepointwhereIhavemetsomanypeoplewhojusttalkandpromiseandtalksomemorethanIamskepticalofeveryone.Tome,potentialinvestorsaren’trealuntil:

=They’veinvestedinmyfilmsbefore.Or… =Theyarewritingmeacheckorwiringmemoney.

OnlythenwillIconsiderthemtrueHNIs.

HonesttoGod.Ifsomeonecallsmeandsays,“Tom,IpromisethatI’mgonnasendyouthecheckfor$2milliontomorrow!”Igivethatabouta20%chanceofcomingtopass.I’vehadpeopletellmefundsweregoingto“close”sooften,andI’dsayitactuallyhappensoneoutofeveryfiftytimes.Soyouhavetohaveahealthyskepticism.

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Neverputallyoureggsinonebasket(seeChapter10:TheTen-ArmApproach).

HaveTheyInvestedinthePast?

Thefirstthingtoaskapotentialinvestoriswhathisorherstoryis.It’sagreatwaytostartapitch,too,becausepeoplereallyliketohearthemselvestalk.Theyalsoliketotellyoutheirstories…it’scathartic,inaway.Now,ifthisinvestorhasneverfinancedafilmbefore,thingscouldturnoutfine,butmaybeaminiredflagshouldgoupandyoushouldstorethisinformationinyourmind.Ifthisinvestorhasnever invested inanythingbefore, amonster redflagshouldgoup!Neithermeansthatheorsheisadeadend,butthesecondquestion isprobably themost important thing I canofferyou:Hasthispersoneverinvestedinanything?Ifinvestmentshavebeenmadeinthepast,hasitbeeninfilms?Whichoneshavetheinvestorbeeninvolvedwith?

Somanyhavebeenburnedinvestinginindependentfilm,it’sactu-allyeasiertoclosesomeonewhohasn’tfinancedoneinthepast.Butthekeyis,theyhavetohaveinvestedinsomething.Youwantthepeoplewhohavemoneytogetridofandarehungryforapieceofthefilmbusiness.

Side Note | There’s a horrible joke associated with independent film. It goes: Q: How do you make a small fortune in independent film? A: Invest a large fortune.

I saythis jokeishorriblebecause ifyoushare itwithaninvestor,you’reprobablydeadinthewater.Thetruthis,mostindependentfilmsaremadeaslaborsoflove,withoutanyideasonmarketingorsellingthefilminthelongrun.IfyoumakeafilmabouttwogaycollegeroommatesinOklahoma,itmightbepersonaltoyou,butwhere’sitgoingtoplay?Japan?France?Germany?Hell,itprobablywon’tevenplayinOklahoma!I’llgetmoreintomarketinglater(seeChapter4:SellingYourselfontheProject),butunderstandthatthestigma associated with independent films is that they don’t makemoney,andthatstigmaexistsforagoodreason.Youneedtobeabletochangethat.

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What Is Their Background?

ItgoesagainsteverythingIsaidinthebeginningofthischapter,butpartofthequalificationprocessislookingatwhothepersonis.Forinstance,onetimeIwasinvitedtobeintroducedtoa“financier.”Heshowedupinabeat-upoldconvertible,wearingsweatpantsandasweatshirt.Hewasalsomissingsometeeth.Now,hecouldhavebeenan“eccentricmillionaire,”soItookalltheinitialsteps,butIfoundoutrightaway that thisguywas justawannabe.Heactu-allysaidtome,“Look,thegoalforallofusistoonedaynothavetoworkoutsidethefilmbusiness.”Turnsoutthisguyhadanotherfull-timejob.Isaid,“Well,Idon’tworkoutsideofthefilmbusiness,”andhejuststaredatme.Canyouguesswhathappenednext?That’sright…hestartedpitchingmeontwoscriptsthathehadwritten.

Appearancedefinitelyplaysanimportantrolehere.Doyouknowwhere theperson lives?There’sabigdifferencebetween living inBeverlyHillsandReseda.There’sabigdifferencebetweenlivingontheUpperEastSideofManhattanandintheSouthBronx.Again,therearealwaysexceptionstotherule,butIhavefoundthatsimplethingssuchaswhatthepersoniswearing,whereheorshelives,andwhatheorsheisdrivingdomakeadifference.Oneofmyinvestorshasabouteightcars,includingaLamborghini,whichhewasdriv-ingthefirstdayImethim.RightawayIwasabletomakecertainassumptionsabouthim,includingthathehadenoughmoneytobuya$250,000car.

Anotherinvestor,whowasvisitingL.A.foronlysixdays,hadbothhisLamborghiniandhisFerrariflowninsohecoulddrivethemaroundtown.That’s right,heactuallypaid$9000percar tohavethembyhissideforhisvisit.Doyouthinkthisguyhassomemoneytothrowaround?

YetanotherhadagiganticloftinManhattan.Thethinghadtocosthim$6–7million!Ofcourseaguylikethatneededataxwrite-off,and, thanks toSection181of the JobCreationsActof2004,filminvestmentisataxwriteoff!

LosAngeles is all about image. I found that out quickly, becauseImoved into ahouse thatwasgigantic, and Ididn’tupgrademy

WhatNoOneElseCanDo45

car.I’mnotreallyacarguy,soIkeptdrivingmyChryslerSebringbecauseitwasreliableandworkedforme.Whathappened?Well,whenIshowedupatevents,noonethoughtIwasimportant.(You’dhavetopullupinaBMW,Audi,Mercedes,Bentley,AstonMartin,Ferrari,orMaserati for that.)But,whenpeoplevisitedmyhouse,theythoughtIwasrollinginit.Truthfully,Ifitsomewhereinbe-tweenmycarandmyhouse.Ifsomeonewasqualifyingmeandhecametomyhouse,hewouldthinkIwasamillionaire!IfsomeonewasqualifyingmeandIshowedupataStarbuckswithmy2004Sebring,hewouldthinkIwasfullofit.Eitherwayhe’dbewrong.Thatoldconvertibleislonggone.I’veupgradedmycartoahigh-endAudi,andnowpeoplethinkdifferently.

Moreoftenthannot,yourinitialassumptionsaretrue.Ifsomeonehas to work another job outside the film business and considershimselforherself“intheIndustry,”heorsheiswrong.Theonlypeoplewhotrulyretainthisstatusarethoseworkinginitfulltime.There’snomiddlegroundforfilm.Actorsandwriterscangetawaywithworkinginrestaurantsorbars,butproducershavetobe100%committed.And the real actorsandwriters areworkingasactorsandwriters.

Never Pay a Fee

HowdoIknowthis?Yup,youguessedit.Ilearnedthisonethehardwaytoo.

ImetwithagroupoutofNewYorkCitythatwasgoingtotakemy15%equity(whichIhadraisedmyself)andstructurefinancingtomakeitafull100%budget.(Structuringcanwork.SeeChapter17:TheStructuredApproach.)Herewasthecatch:Thiscompanyrequireda$60,000“advisoryfee.”Ican’tbecleareraboutthis:Ifany-oneasksforanadvisoryfeeor“consultantfee,”RUNintheotherdirection!Noonelegit(atleastwhomIknow)takesanyupfrontfees.Feesaregivenoutoncethefinancingisachieved.Andtrustme,nooneforgetsaboutfees,Infact,youhavetoavoidthehundredsofpeoplewhowilltrytojumponyour“moneytrain”onceyourfilmisfinanced.Butupfrontfeesdonotexistinlegitimatefinancing.

46BANKROLL2ED_TomMalloy

Intheabove-mentionedstory,Iendedupgivingthisgroup$60,000,andtheydidnothingformyfilm.WeeventuallydissolvedtheLLC,pickedourselvesup,andstartedfromthebeginning.Itwasahor-rible loss of financing.This company knew that we had so littlemoneywithwhichtosuethem(rememberthelessonaboutsuingbigcompanies),andsincethelegalprocesstakessomuchtime,thatwewould justwalk away.Which is exactlywhatwedid.Lessonlearned…thehardway.

Neverpayanyupfront fees!Youwantaconsultant?Thisbook isyourconsultant.You’vepaidalotlessthan$60,000forsomehard-wonadvice.

Look, I’ve been hired as a consultant at times. Some prominententertainment attorneys consult.So I’mnot against consulting ingeneral.Butpleasenotethatnoneofuschargeanywherenearthoseexorbitantfeesandareusuallyjustafewhundredbucksanhourforvaluableinfo.Anylumpsumenormous“advisoryfee”(justwritingthosewordsmakesmecringe)isbadnews.

Remember,qualifyyourHNI,andmakesureheorsheisreal.Thenmoveforwardwithallthetechniquesinthisbook.Ifandwhenyougetafilmfinancedsuccessfully,you’llhaveseparatedyourselffromthepackalreadybybeingabletoachievewhatnooneelsecan.