While those numbers to the left are from Kickstarter donations, one day they could be Kickstarter investment funds. Earlier we reported that the House had passed the JOBS Act, but the Senate wanted some changes to help protect individuals from fraud. The Senate passed their version, and just today the House followed suit and passed the bill. All that's left is a signature from President Obama (which is coming), and American independent film financing will never be the same.
From reading the bill, it seems like the Senate went back on their original objections for the crowdinvesting part of the bill, and mostly stayed with what the House originally came up with. These are the provisions originally posted from the two separate bills from the Vim Funding Blog - it will be updated if I've made any mistakes (legalese is not my first language):
- 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”.
- 2,000 investors is now the limit before 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.
This is good news for independent filmmakers. Really, really good news. Finding financing is one of the biggest issues that we face, and with the Kickstarter revolution, we've been treated to an excellent way to raise capital - our own Koo knows firsthand how important crowdfunding has been for independent filmmakers. The difference now, obviously, is that we don't have to use a workaround to the law. We can now accept actual investments from the general public and we can use that money to make our films. There are plenty of dangers that can result from this practice, and there could certainly be those who choose to take advantage of people, but for the most part this is going to be a huge positive and help push us into a new independent revolution.
It will be interesting to see if Kickstarter or Indiegogo can, or will become, intermediaries for crowdinvesting. If that happens, it will make this entire process that much better and more seamless (not to mention safer). It's an exciting time to be an independent filmmaker - we have impressive digital cameras that are half the cost but twice the performance of cameras only 10 years ago, and now we've got a bill that will make it possible for anyone to invest in and own a piece of your film.
The downside to all of this, of course, is that once people start investing money into something they tend to want to see results immediately. I would imagine that it's going to be a bit more difficult for filmmakers to hide for two years while they make their crowdinvested feature - because people want to know that their money is being spent in a way that benefits the film and leads to a good finished product.
Making a film is no different than running a business. It still takes hard work and dedication - and that won't change with this bill. The only difference is that you've got a few more people to answer to if you choose to crowdinvest your independent feature.