What Is Private Film Equity?
Financing a film is a big deal that requires a lot of patience. If youâre new to film production, you might not understand the different forms of private equity film financing that are available or even what private equity financing for film is. If youâre wondering, âWhat is private film equityâ and what does it even involve, youâve come to the right place. Weâre going to outline the various types of private film equity financing and what they mean for you.
What is Private Film Equity?
Private film equity involves the investment of funds into a film project in exchange for interest in the film or the film company. The use of equity capital or equity investments is a common process for filmmakers.
But if youâre entirely new to the production world it might be something that poses some distinct challenges for you to navigate.
The use of equity financing means that the filmmaker is going to sell interest in the film. And in exchange they are going to collect funds or capital for the production from the investors. The selling of shares or interest though.
Equity Financing
Also means that those who purchase interest in the film will have the right to make some judgement calls along the way. The use of private equity financing is generally only done on a percentage basis. So that the filmmaker can retain much of the control of the production.
For example, the filmmaker might equity finance 50% of their production. Maintaining at least 50% control so that they do not lose all rights to the film.
Likewise, many like to equity finance just 25% of the film production. So as to maintain a level of interest that feels most valuable and safe for them in the long run.
Types of Equity Financing for Film
Many types of private equity financing exist for film production. The sale of shares through private equity film financing investments allows the filmmaker to raise capital.
While the investors are able to diversify their portfolios in a way that is most suitable to their needs. This may mitigate some of the risk involved, too.
Film investors might invest in pre-sales, distribution, or other areas of the production. The idea is to provide equity financing for the production without placing undue risk on the film financier or investor.
Thus, private equity film funding investors are able to invest in a number of different film projects. Diversifying their investment portfolios so that they can limit volatility.
Financing Based on Distribution
Sometimes, private equity film financing is based on the distribution of a film. In this case, the sale of securities of the film company will be based on raising the amount of equity owned by outsiders.
Other than those involved in the production. Equity financing also sometimes involves selling the filmâs distribution rights.
When distribution rights to a film are sold, the equity that is purchased is in exchange for a guaranteed payment. For example, the film company will sell the distribution rights to a film to the investor in exchange for say $100,000.
Should the film be distributed then in that region, no future revenue will be included in the deal.
What Financing is Right for Me?
If youâre trying to decide how to raise capital for a film production? Youâre probably wondering what film financing is right for your individual needs.
Private film equity financing is important if youâre willing to sell shares of your film or film business to outsiders but this isnât the only option for raising capital.
Film capital can also be raised through private bank funding as well as through individual investments from campaigns and through things like equity crowdfunding.
Equity crowdfunding is similar to private equity financing but the equity is sold through a crowdfunding campaign in which people commit to purchasing shares in exchange for their donations in a crowdfunding platform.
Bank Financing
If youâre considering bank financing, you might have the most luck if youâve already found some private equity investors that have interest in your film. Bank funds might provide the difference or gap financing for your film production to balance out production needs.
Distribution deals can also provide some necessary capital. The distributor might require that you supply a completion guarantee in order to earn any funds from them in advance of the distribution.
But this is one of the many ways that you can raise capital for your production early on in the process.
Type of Financing
If youâre not sure what type of financing is ideal for your production? The first step is to familiarize yourself with the many different types of funding and capital investment opportunities that are available for filmmakers.
There are tax incentives that can cover the cost of production. There are distribution deals which can cover production costs. And there are many forms of individual and private financing available as well as crowdfunding and equity crowdfunding.
Consider This
Keep in mind though, that anytime youâre using equity financing for your project? Youâre selling a portion of the project in exchange for the cash that is being provided.
This means that over time you will have less equity in your production. And that you will own a smaller share of the overall film.
Itâs very common for filmmakers to use equity financing. Including private equity financing deals to raise the capital they need. As long as they maintain a share that feels comfortable to them in terms of maintaining ownership rights to their film.
Whether you sell a lot of shares, or just a small percentage to raise the immediate capital you need to prove yourself to other investors is 100% up to you.
The Takeaway
So, what is private equity film financing? Itâs the selling of film shares to investors in exchange for their capital investments that allow you to move forward with production of your film project.
Without private equity financing you might have trouble raising funds because there are such risks involved in the film industry. Thus, many investors are more likely to provide investment capital if youâre willing to give them a piece of the business in exchange.
