Financing / Crowdfunding

Geoff Hall Congratulations on your progress. Quick reply is debt is okay for film tax incentives, pre-sales, unsold territories. As a vehicle for funding other than cash flowing the film's assets, it's a challenge, expensive, not very common. Never make a personal guarantee (PG), which is most likely the only way non-asset backed loan would be made, imho.

Jack Binder thanks Jack. Yes, I noticed that they say that each loan is repayable and not dependent on the performance of your film. That to me would say that we are maybe in PG territory?

Try some of the small business loan companies. Some gave out unsecured loans.

Thanks Jon Shallit. We have decided not to go into debt to make the film. It’s not the way to go for our film.

Geoff Hall Just for your, 'learning' debt finance is very common and most films will have an element of it, from small indies to blockbusters. and you don't have to make a personal guarantee. There are many specialist lenders that do it, most reputable, some possibly not. Of course there is interest and fees, but these can be built in to the loan.

The loan is repaid from, in the case of pre-sales, when the distributor pre-buys the film, or gap - when unsold territories are sold, for tax incentives, when the tax authority of where you're shooting, pays you the incentives against your audited accounts. You do have to have a sales agent to provide sales estimates to give comfort to the lender.

The lender may not loan the actual amount of the tax incentive calculation in case you don't spend as much as expected, so they 'discount' the amount to say 80% of what you're asking for.

If the majority of a film is funded through debt, it's more attractive for an equity investor as they only have to invest say, 20% ish, so their risk is lowered.

I've rewritten scripts for indie director-producers during pre-production and production, Michael Fitzer, MFA. It was because of budget, location, dialogue, etc.

The youth of Skydance might imply more opportunities for independent makers in the digital and interactive field.

I think Paramount Skydance buying WBD is better than Netflix buying WBD, Amanda Toney. One reason is the possibility of more theatrical release movies, and hopefully longer release windows.

I’m a big Skydance fan and love the entire team over there. I’m rooting for them.

Exciting times, never a dull moment in entertainment!

https://www.stage32.com/blog/4282

Agree with you Geoff!

Amanda Toney it's difficult going at the moment, Amanda. It's a terrain that is tough to navigate. I'm hoping to record a panel discussion on the state of the UK film industry, early next year.

Wow! Even more significant international entertainment news! Amanda Toney, things are looking phenomenal for the industry's future!

Geoff Hall, that's also phenomenal!

Amanda Toney Hi Amanda, I’m just wondering if as someone living outside of the UK, do you see as the problems with our industry?

Jack Binder thanks for sharing, Jack. I hope you are well. Have a great weekend.

Willem Elzenga 2 you're not wrong but I also don't understand the point of your response

This is also an educational platform as of what I understand of it. I am just here today to help out the peeps with my 30 years of professional experience.

They want money like all the rest. If they LOVED your work that much they should not ask you for funds.

I have gone through the same with them, and they still keep requesting. I can afford it, and I still did not agree. I agree with Jon and that's what I responded to them. I can discuss further on the messaging if you like.

JPatrick Baker I was in the same position and was asked to pay $10, 000 for them to represent the script to financiers like BondIt. That money would be returned - so I'm told - when the film was financed, but it begs the question that if that is the case, why do they need payment in the first place? Personally speaking, I would just walk away.

Ryan Elliott After reviewing it, I see a number of red flags that could expose you to legal and financial risks. There are significant concerns with the way you’re presenting the fund’s structure, its risk profile, and the way you’re communicating your potential returns and principal protection.

1. Unrealistic Return Projections (20-30% Annual Returns)

The goal of generating 20-30% annual returns through swing trading options and leveraging market momentum is highly ambitious and could be misleading for potential investors. Investors tend to be highly litigious when investments sour as they seek a way to claw back whatever they can get. While swing trading can be profitable in the right market conditions, consistently achieving returns in this range is incredibly difficult and unrealistic, especially in volatile or sideways markets.

The stock market averages around 10-12% annual returns over the long term, and many professional traders, even those with highly sophisticated strategies, don’t consistently achieve 20-30% annually.

You mentioned using options and leverage when the conditions are right, which inherently increases both the potential returns and potential losses. This kind of strategy can be extremely volatile and could lead to significant losses, especially if the market behaves unexpectedly.

Investors need to be fully aware that there are no guarantees when it comes to achieving consistent profits—and any claim that the fund will consistently generate 20-30% annually is misleading and could expose you to legal action for misrepresentation.

2. Risk of Principal Loss

While you state that you are focused on "protecting your principal", this is a contradiction in the context of the strategy you’ve outlined. You mention using leverage and options, which are high-risk strategies. The reality is that there is no such thing as guaranteeing principal protection in a fund that employs options trading, particularly when using leverage.

Options trading is a high-risk strategy, and positions can be wiped out in a matter of days or even hours, depending on market conditions. In the event of a market downturn or significant volatility, it’s entirely possible that the fund could lose substantial portions of its capital.

Principal protection in this context is not realistic. If the fund uses options, leverage, or other high-risk strategies, it’s critical that you disclose the risk that investors could lose their principal. Failing to do so, or implying that principal protection is a guaranteed outcome, could expose you to lawsuits for fraud or misleading statements.

3. Lack of Transparency Around Film Investment Strategy

The fund’s strategy is focused on swing trading options in the stock market, but it’s unclear how this ties into the film investments. You mentioned using the profits from the hedge fund to fund films, but it’s unclear:

How you plan to balance the two strategies. The high-risk nature of swing trading options seems inconsistent with the relatively illiquid and long-term nature of film investments.

If you’re raising capital for a hedge fund and using those profits for film investments, you need to clearly outline how these two strategies will interact and how investors will be exposed to both. Film investments are highly speculative, and you can’t simply use hedge fund profits to fund films without properly explaining how both sides of the fund are managed, and how that might increase the overall risk for investors.

It seems like there’s a conflict between the hedge fund strategy (focused on high-risk, high-reward short-term trading) and the film strategy (focused on long-term, illiquid investments with very low success rates). Without a clear strategy for how these two sides will function together, investors may be misled about what they are actually investing in.

4. Backtesting Methodology and Performance

While you’ve backtested your strategy over the last 15 years and claim positive results, there are several concerns:

Backtesting results are not indicative of future performance. While it’s useful to backtest strategies, past performance doesn’t guarantee future results, especially when using highly volatile instruments like options.

You mention that the system is designed to respond to what the market is actually doing, but market conditions can change, and past results may not replicate in the future, especially with changes in market volatility, interest rates, or geopolitical events.

Consistency in the strategy is key. If there are periods of underperformance (which is inevitable in any strategy), you’ll need to disclose how those drawdowns will be handled and how investors will be protected from catastrophic losses.

5. Legal Risks and Investor Misunderstanding

You are making several claims that could easily be misinterpreted as guaranteeing profits or principal protection, which could expose you to legal action. If investors lose money, especially after being led to believe that the fund is low-risk or guaranteed to produce positive returns, they could take legal action for misrepresentation, failure to disclose risks, or fraud.

Specific Legal Concerns:

Principal protection cannot be guaranteed, particularly when using options and leverage, both of which involve substantial risk of losing principal. The SEC and other regulators could view these statements as false or misleading.

Unrealistic return projections of 20-30% per year are problematic. These figures could be seen as bait-and-switch, as historical returns in this type of strategy are far from consistent.

The lack of clarity about how the hedge fund’s profits will fund film investments without putting investors’ principal at risk creates further confusion. If the hedge fund takes losses in its trading positions and then uses those same funds to invest in films, that could create conflicts of interest and expose you to potential claims of mismanagement or failure to disclose material risks.

Kenneth, thank you so much for all the time and thought you put into this response! You are 100% valid and accurate in your points. I'll try to address them if I can, and some I may just need to go back work out on my end.

1. You're right, the market averages 10-12%, but that's when you buy and hold. On average, since 2000, if you add the market move on the up days, and add the market move on the down days, you get the total range the market moved for the year. It might it might return 10% year over year, but it actually moved on average 46.5% (according to Grok). Using technical analysis If you could capture half of that move, we're at ~23% (no leverage, no options), which is in the target. If you use 2x leverage, you could be twice that, and instead if you keep the majority in money market funds and use options on the up moves, you can realize gains in that range. I'm also capping the fund at $100M, with the idea of expanding to 3 total funds, so $300M total. When a $10B hedge fund wants to hedge their long position, they may buy $50M worth of puts, just in case the market goes down. I'm looking at buying a $5-15M (5%) position, in the direction I expect the market to move.

Also, when it comes to professionals not getting superior returns. I'm not sure why they don't. I've heard it could have to do with the size of the fund, and if you're making frequent trades, you can actually move the market. Another reason might be (and I'm still learning some of this - full transparency), you could get stuck with a liquidity issue. You need someone to take the other side of your trade, and if you have $1T, there aren't too many people who can take the other side of the trade, buying or selling.

2. When I say, "protecting the principal," I should specify. When someone has $5M to put into a movie, their principal is spent. There's nothing left, and often the producers took out loans against credits and rebates, and the movie has to make significantly more than it cost for you to start getting your principal back. With the fund, your principal is never at risk from the movie's performance, because your principal is never invested in any movie (fund profits are, so you're basically playing with the house's money).

Your principal is in the fund...so your principal IS 100% at market and fund performance risk. I do maintain a giant cash position (money market funds, about 4% return currently) with whatever isn't in an option position, starting with one option position (5% of the portfolio), so about 95% is in cash. If another buying opportunity comes up, cash drops to 90% cash, and so on. As we close out an option position, any profit tops off the fund at $100M (if there were previous loses) and excess goes into a sub account for each film project.

You're also 100% correct - options can be wildly profitable, or fall to $0. The loss is limited to -100%, but there are positions that have made 40-300% returns. That's why we use 5% positions, so if there are multiple losing trades in a row, you still have dry powder to take advantage when the market rebounds.

3. I'm all about transparency, almost to a fault. I was in banking for several years, and I talk countless people out of getting credit cards by explaining how they actually work. I have a page on my website that shows the money flow from the fund and from the movies. Also, money never goes back into the fund. Any fund returns over 30% (net of fees - see website), go right back to investors. Any film revenue goes right back to film investors 120% of the budget, then 50% in perpetuity.

The goal for both the fund and the films is to have limited downside (small positions, small budgets) and unlimited upside.

We're keeping film budgets at $5M (it's the original Blumhouse model), so as the $100M fund makes 5%, we move $5M to an LLC with every fund investor as a prorated percent partner according to their participation in the fund. They're on the escrow account where all the money comes in from the film, so everyone gets their percentage. I'm hoping there's very little overhead, but the money in the account gets distributed to the investors according to their percentage. If you have a 10% ownership stake, and $1M comes in, you get a check for $100k. I really want it to be that easy. We're just getting started, so I think it'll work like this, I want it to, at least that's the plan.

4. You're right. In all of finance, there are absolutely NO guarantees. Even bonds, backed by the full faith and credit of the US gov't, you can't ever say they're "guaranteed." Backtesting or any prior performance does not indicate or guarantee future performance. However, it's the best indicator we have. The market averages 10-12% when you buy and hold, but that doesn't mean it'll keep doing it. But it probably will. If you're engaged to someone who cheated on her last 4 husbands, you might want to get a really solid prenup.

There are definitely trades that lose -100% and go to $0. That definitely happens. The objective is to have enough trades, based on entry signals, that the profitable trades outweigh and outnumber the losing trades.

I try to be as open and honest as possible. As far as bait-and-switch, maybe I need to lower expectations. Do you have any suggestions for what would be appropriate?

Thank you again for your thoughtful response!

Ryan Elliott Actually, if talking about a specific index like the S&P, between 1926 and 2023, the market's typical yearly performance is about 12.70% (average) and 15.43% (median). That is data spanning almost a century, or 100 years. Obviously, in any particular year, the market could be up or down 30% to 40% or more, which is where active vs. passive investing or investment management comes into play. The bottom line is that there is always risk the market could swing in any direction and at any time, but investors in the stock market typically have the appetite for the investment swings that come with that asset class. The mere fact that in finance, the rewards tend to increase based on the level of risk implies that if someone is targeting a 20-30% return, that essentially does imply taking on more than usual risk.

It's one thing, in hindsight, to point to specific market movements and performance, but in the moment, when facing the pressure and paranoia of daily price fluctuations, uncomfortable or model-defying trends, market buzz, and the overall panic exhibited by other market participants, it’s natural for paranoia to spread quite rapidly, and models can get tossed out or sidelined because you don’t have hindsight in the moment.

The market is very efficient, and arbitrage opportunities do not exist for very long. If you walk down a street and see a $100 bill by the roadside, you can trust it won't be there for very long. There are some similarities between this and professional money management. Even for the most skilled money managers, when you have the responsibility of generating income and profits that millions expect in the form of pensions or other types of obligation, making an explicit promise in terms of expected return is rare and uncommon and so is generating 30% per year returns every single year.

The investors that focus on film financing tend to have a focus or expertise in film financing, and most have the appetite and sophistication to deal with the risk—or should.

Also, films with a budget in the $5-$10 million range are technically indie films and are incredibly risky. As much as 90% of films made in this range fail. When you mix that in with a purely speculative investment strategy, the risk further increases, not decreases. There is a reason why banks can't touch film financing as an asset class, and those that do only loan against tax credits unless of course you provide a $5-$10 million collateral..

When managing any sort of investment fund, you typically can't make any explicit guarantee that you'll attain a return of such-and-such or that principal is "protected," "guaranteed," or anything remotely close to such language, because there are attorneys who make a living suing people to recover funds invested in any venture because of loose language that could lead an investor to infer that is what you meant.

Wow! Great idea! Asked for an add!

Ryan, you are spot on but being an accountant and experienced in the market, I agree with your plan. Your profits also have your time and experience invested and not easy. I have done the same but with very small base. It helped to produce short film which in first shot went on the American pavilion of Cannes. Now working for a musical feature based on true events with Grammy winners; award winning cast and crew on board. But building guard rails for success will definitely make you shine. I am blessed being a Writer and Producer is an advantage and working on 2 more features. Good luck!

Hi, Michael Fitzer, MFA. Congratulations to you and the team on being back on track! Back when I tried to make two feature films, my biggest fundraising obstacle was finding investors. And I didn't know a lot about film financing.

Maurice Vaughan , I'm not sure of your situation but what I find is there are so many people out there wanting to jump in and direct a $1M+ feature with only a few years in the business and no experience as a feature producer or director. I've been at this a long time and have lots of credits, but none as a feature director (though lots of commercials and docs), so I had to go back to square one and start with small narrative directing gigs. A short here and there. $1000 budget, then a $10K budget, then a $25K budget. I had to show investors and actors that I know how to SUCCESSFULLY take a story from script to screen. There is a lot of wisdom in starting small. I recommend it for everyone wanting to fund their first feature. Here's the biggest takeaway... I found that I don't like directing narrative feature work. I love writing it, shooting it, producing it, but when it comes to being a feature narrative director... I'll leave it to people better than I am at making it all come together. Shorts are still fun though. ONWARD!

"there are so many people out there wanting to jump in and direct a $1M+ feature with only a few years in the business and no experience as a feature producer or director." That was me, Michael Fitzer, MFA, except I was producing and the first movie was a big-budget project. If I was to do it again, I would go with a micro-budget feature script or micro-budget short script. Thanks for the info and takeaway.

And many interests there hiring and using Stage 32 Certification, Jack Binder

Amanda Toney personally, I can’t see it getting past your government’s scrutiny of an American company being owned by a Saudi entity. Unless of course there’s a kick-back!! It doesn’t seem like a very good fit. There’s also the Saudi money being tainted by restrictive social policies towards women and the link between this money source and the funding of terrorist organisations. Or is that a rabbit hole we don’t want to go down?

dont think it will pass through as it relates to being 100% Saudi owned

Amanda Toney Geoff Hall Barbara L Gray This is definitely one of those discussions that can easily offend people from either side of the argument, whether it’s regarding the U.S. or Saudi Arabia.

The real question here is why they’re even considering selling such a prominent company in the first place. You’ve got a Warner CEO who was paid total compensation of $51.9 million in 2024, $49.7 million in 2023, $39.3 million in 2022, and around $246 million in 2021. What exactly is he being paid these sums for? Is it to run the company into the ground, bankrupt it, and then put it up for sale? With all its resources, Warner’s only solution seems to be a sale. This could be a clear example of how bad management can destroy a company.

What’s particularly interesting is the article mentions, “Any sale would require approval from the Trump administration, along with review by European regulators....”

This seems almost laughable. Trump has far too many business and financial ties to Saudi Arabia to make an unbiased decision here. The Trump brand has been licensed for luxury developments in Saudi Arabia, including Trump Tower Jeddah, Trump Plaza Jeddah, and multiple projects in Riyadh, all in partnership with major Saudi developers.

The same PIF looking to acquire Warner also invested over $2 billion in Jared Kushner’s private equity fund, which generates more than $125 million in management fees for him. And, let’s not forget Trump’s golf courses, which have become key venues for LIV Golf, a Saudi-backed league funded by the PIF. These are strategic investments by the Saudis, and one could argue they might leverage these connections to influence U.S. policy in their favor.

If Trump is the one to make the decision, I don’t see him wanting to offend the Saudis—not with so many business interests in the region. This isn’t just a Trump issue. I’m not aware of any recent U.S. administration that has had particularly strained relations with the Saudis. While the public may generally object to a Saudi takeover, it’s hard to see how that matters. The public is not in a position to make these decisions, and regulators are also susceptible to the same influence. Foreign groups and organizations actively lobby in the U.S. to sway policymakers, so I wouldn’t be surprised if the PIF successfully acquires Warner.

It’s easy to understand why the Saudis would be interested in buying a company that owns CNN. Controlling CNN would align with Saudi Arabia’s broader objectives and give them significant influence over global media narratives.

Admittedly! There are technicalities! Will this then, give rise to other Saudi Co. initiatives and even further,.. local “business competition”, plighting and plying for investments?....The world of entertainment is something else!?

There goes those mentioned eyebrows again!