As a finance person, I spend a lot of time cleaning up after producers, which makes it easy to opine on their shortcomings and how they can better themselves.  But I also spend just as much time cleaning up after investors who’ve jumped ship.

The contractions in the foreign pre-sale market, coupled with increasingly conservative gap lending, are putting considerably more pressure on the amount of equity required to get a film financed.  Unless a project outperforms pre-sale expectations, most producers should expect cash/equity to comprise 45%-50% of their budgets.  That’s what it takes to get a film’s financing closed these days. It might appear to only be 35%-40% when you’re first going into your loan closing, but that’s where it’s going to end up, six weeks later – and it’s during those six weeks that most investors leave their producers standing at the alter.

Investors have all sorts of reasons for abandoning ship: market shifts, divorce, investigations, misinformation, epiphanies, moral issues with the plot, something better comes along, they never had money to begin with, and so on.  Divorce is probably the leading cause of investor flight, but sometimes it’s something reasonable, like they couldn’t come to terms with the lenders or co-investors.

Nevertheless, raising 50% of a film’s budget, in cash, is a heavy burden.  Very few people can cut a check for half of a budget, so it usually ends being multiple investors – and with each investor comes an additional point of vulnerability in your finance structure.  Producers can mitigate the risk of structural collapse by insisting that their potential investors are transparent and accountable.

Understandably, most producers are terrified of offending or “losing their investor”, but it’s important to remember that nobody is an investor until the money is in the bank.  Until that time, they’re just a person that you may or may not do a deal with.

Therefore, transparency is the only insurance policy against wasted time and money.  Proof of funds must be obtained straightaway.  If they can’t show you where the money is, then it doesn’t exist.  If they stall, move on.  If it takes more than 30 seconds to explain how they’ll fund, forget it.  Anybody who’s acquired wealth sufficient to invest in movies won’t have a problem putting you in touch with their banker, lawyer, accountant, or business manager.  By the same token, knowing who their lawyer will be for the closing is also very helpful; you can tell a lot about a person by the lawyer and firm they use.

Sometimes, just putting pen to paper can be sufficient to clear away the shysters.  Unfortunately, Letters of Intent (LOI’s) are so mired in funding conditions that they’re almost pointless.  Instead, having your investors sign meatier, short form, financing agreements that have strong representations and warranties can give producers some legal remedies, like detrimental reliance.  Generally, it’s cost prohibitive to pursue a claim, but it might give you enough ammo for a settlement, or at least keep them from wasting any more of your time and money.  In either case, your short form should clearly spell-out the conditions for escrowing and releasing funds.  If you’re still skeptical, include a meaningful kill-fee (or make them liable for your legal expenses) after the producer has satisfied certain conditions.

Bottom line, it takes money to raise money, but it’s money well spent.  Investors who don’t have money will do whatever it takes to avoid spending any, and that’s what you need to look out for.


  1. Jeff,

    I know this is a wide open question, but what are the typical time windows you see when investors escrow their funds, to the time the monies are released for the production? 30, 60, 90, 120 days? Longer? Shorter?

    For instance, if I’m looking at several investors, I might have to ‘collect’ them along the way. The time between finding the first investor and last investor shouldn’t have too much time elapsed, or I might risk losing the first investors.

    Hope I’ve explained my question sufficiently.

  2. Forgive me, but generally, how would this short form financial agreement differ from a PPM or Purchaser Questionnaire? Would is suffice to present the investor with a Purchaser Questionnaire before drawing up a PPM?

  3. Jeff,

    You nailed it!! It’s not REAL unless you know 3 facts:
    1. Who
    (Are they accredited and liquid?)
    2. How much
    (What ROI do they require for their involvement?)
    3. When
    (Exact date that you can deposit the check.)

  4. hi, i use to be a merrill lynch stockbroker. and have produced features. i can raise up to $3 million for an A list indie horror or vanity interesting project. contact me if you have proof and a business plan and track record. throughout due diligence. thanks.

  5. Excellent article, Jeff. I agree completely. To me, the best way to prove genuine intent is to get front money of some kind from an investor even before you even think about any long-form contract.

    A situation happened with me a couple of years ago. I flushed out some “investors” of mine as shysters, who were using the production to promote themselves and their association with us. Just the fact that I’d already appeared on the equivalent of 20/20 on Israeli TV casting an Israeli star, a segment the “investor” had produced himself, was enough to make me want to bolt early on. But the exec producers insisted I do the segment, and these were producers of enormous standing in the indie film world, so I felt lucky they were on my team.

    But they weren’t. After I tried to bounce the “investor” by getting front money, they turned around and tried to do a bigger funding deal with my exec producers on a whole production company, and used their apparent inability to work with me as an excuse to break the deal on my project. With no non-circumvent agreement with my EPs in place, I was screwed. But at the end of the day, after many trade articles and much hullabaloo, the “investors” still turned out to be full of shit and never came through with the money for the production company, either. But I’d called it right.

    To be honest, if it was a miracle pre-recession to close a financing deal, now it is nearly impossible. Smart money isn’t going to buy the current models, and dumb money is very rare, usually inherited wealth. As one genuine investor said to me before getting up from the table on the acquisition of a film library, “The rewards in filmmaking aren’t financial, they’re psychic, and that makes no business sense.”

    Until something changes drastically, I’m out of the game. Internet content, here I come.

  6. Good article Jeff. I’ve been there. And a bail out by one could create a domino effect. Get something with teeth early on. Avoid the time wasters

  7. Yes the old “You show me yours and I’ll show you mine” is great when it’s a two way street.

    Beware when it only works one way …
    it’s usually a scam, out to milk your carely found investor’s cash.

    If any party wont agree to Proof of Funds – then they are totally untrustworthy.

    I had that one happen to me last year – I called it “Show or go … and they went.”

    An incredible waste of time.

    Scammers will also try to harrass you with claims of urgency to sign deals etc and bury you in their “necessary” but expensive legal paperwork.

    It’s all BS if there is no Proof of Funds.

    Your real investors will respect you more if you are serious about protecting their cash.



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