Crowdinvesting Bill Stalls in the Senate, Watch a Scene From Crowdinvested Film 'Iron Sky'
There have been hundreds, if not thousands of films that have been crowdfunded and have appeared at film festivals - but only films overseas (because of U.S. laws) have been crowdinvested. If you haven't seen the term before, or if you've never heard of the film, you should check out our previous coverage of the space Nazi film 'Iron Sky.' The film raised almost a million Euros from crowd investment, and 300,000 Euros in traditional crowdfunding money. The largest sum of money came from outside financing, which totaled 6.3 million Euros. The film recently showed at Berlin and SXSW, and it hasn't been released yet, but you can watch the opening scene now.
The film has been critically panned thus far, but that still doesn't take away from how massively successful the crowdfunding and crowdinvesting campaign was.
Even though it's been posted before, I think it's interesting to watch again their strategy for outsourcing their work:
It's also interesting that as I'm writing this today, there comes news that the JOBS bill, after being passed in the House, has stopped in the Senate. This bill is particularly important for filmmakers because there are provisions which allow for crowdinvesting here in the U.S., which would be a major step. To quote Scott Macaulay from the Filmmaker Blog:
The JOBS Act aims to change that, allowing businesses, including filmmakers, to solicit actual investment over the internet. A person — even someone not qualifying as an “accredited investor” — could invest up to $10,000, or 10% of his or her income (whichever is less), in a startup capitalized at $1 million or below and receive an equity position in the business.
While there was hope last week that this legislation would quickly pass Congress and be signed by the President, that schedule now appears unlikely. As Tommarello, quoted in the Forbes piece, said, “Best case scenario is that this would pass in May. Then the SEC would begin rulemaking. We’re at least a year away.”
There are certainly many negatives that can come from crowdinvesting, but it's truly the next step in financing for independent films. Crowdsourcing thus far has provided countless filmmakers with necessary money that they otherwise wouldn't have, and I can only imagine that if the bill passes and we can accept real investments here in the U.S., it will be a far more positive landscape for independent films.
Here are the complete provisions of both bills, thanks to user Shenan for finding this link from the Vim Funding Blog:
A look at H.R. 2930 and S. 1791
House Bill 2930, which was passed on 11/3/2011 by a margin of 407 to 17, outlines the following key provisions for raising investment capital through crowdfunding:
- Up to $1 million may be raised in a 12-month period, or up to $2 million if audited financials are provided to potential investors.
- Companies raising funds through crowdfunding may use social media, general advertising, and other similar means to spread the word to prospective investors.
- An investor may invest up to $10,000 or 10% of their annual income (whichever is less) in an individual offering. Investors do not need to be “accredited”.
- Crowdfunding-round investors would not count toward the 500-investor threshold at which companies are required to go public.
- The issuer must state a target amount, and then must raise at least 60% of that amount for the round to occur. If the 60% threshold is not reached then no funds change hands.
- A licensed intermediary may be used to execute the transaction. Intermediaries shall be required to warn of the risky and illiquid nature of these investments, take reasonable steps to reduce fraud, carry out a background check on the issuers, maintain records per SEC rules, and shall not offer investment advice.
- State securities laws are preempted in this type of offering, which means that pre-registration of offerings with state agencies will not be required.
- Raising money through crowdfunding will not prevent you from concurrently raising funds through other existing mechanisms.
Senate Bill 1791 outlines a similar crowdfunding exemption, with a few important differences:
- The per-round limit is set at $1 million, and the per-investor limit is capped at $1000.
- An intermediary will be required, not optional.
- The state rule-making authorities will have more of a say in registration and other requirements.