While narrative filmmakers may be more familiar with seeking equity investments to fund their work, documentary filmmakers have only recently turned to this type of funding.
Equity investments frees documentary filmmakers from relying solely on grants, private donations, and crowdfunding, which is more typical for nonfiction. But what is an equity investment and how do they work?
An equity investment means that the investor (a person, group, or company) will own a stake in your nonfiction film or limited liability company (LLC) and is looking to recoup their investment. Using equity investments does not preclude a filmmaker from also accepting grants and donations – or other equity investors. For instance, a filmmaker may also work with a fiscal sponsor, such as a foundation, to serve as its nonprofit arm to receive the donations and then grant it to the film. Specific terms would be worked out with each film’s supporter.
This year's Camden International Film Festival included a panel about equity investing for nonfiction films, which included representatives from Impact Partners (The Cove, The Queen of Versailles), Chicago Media Project (Dreamcatcher), Pilot (The Diplomat, Our Nixon), as well as filmmakers of Frame By Frame, a social impact driven documentary funded by Pilot.
Adding the element of equity, or ownership, with a social-impact film results in multiple goals for the film and filmmaker: artistic, financial, and the social or charitable cause in the film. The CIFF panel provided guidelines as to how to navigate these complexities, which may help you as you consider looking toward equity investments to fund your next documentary.
An equity investment of this nature is more than a financial relationship. It is also a personal investment to foster awareness and change about a particular social issue. So, find an investor who wants to collaborate with you and supports your film's subject and style. "Some investors want their name attached to a great cause. They are often great advocates for your film," said panelist Louis Venezia from Pilot.
Educate your investor in your process as a filmmaker
According to panelist Alexandria Bombach, director and producer of Frame by Frame, "It is your responsibility as a filmmaker to set the investor's expectations of their return." Your investor should also educate you, the filmmaker, in their process and goals.
When working with multiple investors, a payback hierarchy is often set to identify whose investment is returned first, second, etc. In this repayment system, referred to as waterfall payment, senior lenders receive repayments from the filmmaker first and subordinate lenders follow. By delineating the order of return on investment (ROI) for each investor, the system provides different types of investors with different confidence levels of their repayments. Specifically, those earlier on the hierarchy are more likely to seen a return.
Before you accept the funding, you might want to ask the following questions:
- What are their goals as an investor?
- What control over the edit do they want?
- How does the investor see the film positioned in the market?
As difficult as it may be to look a gift horse in the mouth, the best partner for your work is one where the investor’s goals matches your own.