Film Finance: Three Major Differences Between Social Media Crowdfunding vs Private Equity Investors

Crowdfunding is all the rage. Independent filmmakers all over the world are raising $5000, $10,000, even $75,000 to make independent films. They do it with the help of their friends, family, social media network and a bunch of strangers who've  gotten a case of the warm fuzzies when they hear about why the filmmakers are making the film.

But savvy film investors don't care about the why. Experienced film investors, the folks who'll cut a check for $100,000 as opposed to giving a filmmaker $50 from a credit card, want to know two things:

• Does the filmmaker have experience? (does s/he know what they're doing)
• Will I make money?

Savvy film investors don't care about dreams fulfilled, great expectations and spiritual callings. Chances are they've seen it all before and heard it all before. Savvy film investors may not even care that the filmmaker is a nice guy, or conversely, an arrogant SOB, as long as the filmmaker can make a film that will sell.

In light of this, it's important to note that most of the reason employed to convince a person to spend $10 or $25 on a filmmaker via a social media network mean zero in the real world. If a filmmaker wantsto make the transition to producing or directing films that they don't have to finance themselves, it's important to look at filmmaking as a business, not a social platform to test their artistic ambitions.

There is one tool that will make all the difference in the business endeavor of filmmaking. The Prospectus. The major difference between a Film Prospectus and a Crowdfunding Campaign is that a film prospectus is designed to show investors that you've done your homework and that you are committed to making money! This is why filmmakers who are stuck on the idea of film as art will have a tough time convincing  investors to finance a film.

Here are three distinct differences:

1. A film prospectus places less emphasis on your ambition and more emphasis on your business sense. A crowdfunding campaign's primary tool is the like-ability of the filmmaker(s). A prospectus illustrates that the filmmaker has spent significant time researching markets (foreign and domestic) and fully comprehends the intricacies of film distribution, commercial viability and sales potential. Imagine the difference in asking, "please invest in my film because it's my lifelong dream to be a filmmaker" versus "please invest in my film because I know it will make us both a lot of money." Doesn't matter whether the second statement is purely speculative or not, the first impression is there and says, this person is focused on business.
2. A film prospectus is illustrative of the character of the finished film, not the personality for the filmmaker.  Crowdfunding campaigns are almost synonymous with filmmaker profile videos. A film prospectus illustrates the commercial character of the film: the genre, the cinematic look, the theme, the scope, etc. The very design of the prospectus shows the potential investor that the filmmaker already has a specific vision for the film. 
3. A film prospectus focuses on the money an investor can earn, not the money the investor must spend. This is a major difference from a crowdfunding campaign because they thrive on gifts and donations. A prospectus will discuss potential ROI and compensation scenarios. Crowdfunding campaigns discuss the neatly packed DVD perks and 'thank you' film credits. Also a crowdfunding campaign requires little to no research. An effective prospectus must include comparable film and distribution scenarios, target audience research, demographic data (domestic and foreign) and as specific distribution plan.

A film prospectus and a crowdfunding campaign are each important in their respective worlds. But while a prospectus can bounce between both worlds a crowdfunding campaign cannot effectively live in the professional filmmaker's world. If an independent filmmaker hopes to one day direct or produce a film with a million dollar budget or more, his/her chances are slim unless they become familiar with the concept of a prospectus