Crowd funding


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MONEY AND THE POWER OF THE MIGHTY INTERNET!
Peter Savage marvels at the power of the Internet to bring low cost documentary films to market and, inevitably, has an idea for one of his own
For the last two weeks I have been speaking at the Look Listen Experience roadshow around Great Britain and, after my short (and sometimes informative) speech on business fundamentals, we had several lively question and answer sessions. One main theme came through them all: the lack of finance for small business investments, especially for small low-cost films or documentaries.
In each session I was asked about my experience of crowdfunding – a subject about which, until a month ago, I knew little. However and coincidentally, a few weeks earlier in February I had been to a conference looking at new ways to get investment into small and medium sized enterprises (SMEs) as they had been identified – by all business commentators – as the most deprived of investment funding. It was there that I first heard of crowdfunding.
What is crowdfunding?
For those of you who don’t know about crowdfunding, it is inspired by the term crowdsourcing – itself a new idea that emerged about five years ago – which uses collective groups or networks, including but not only the Internet, to find people who can solve problems or fulfil tasks. The topic is posted on the forum and people respond with suggestions or offers.
Crowdfunding refers to people who pool money (rather than ideas or efforts), usually over the Internet, to support projects initiated by others. Projects range from disaster relief, to artists seeking support from fans, to political campaigns, to films. Ideas are posted on a crowdfunding website with a request for a specific sum of money to fund it.
Making me the star of my own show
For example, suppose that I would like to make a short documentary on business fundamentals. I’ve written a script, I know a producer-director, and together we think we can make this ‘doco’ for £5,000. We put together a two-minute teaser and decide that investors will receive a copy or download of the documentary plus a share of any TV monies we receive when we sell it on to air. We decide on a 50 per cent share for us, and a 50 per cent share for the investors split according to their levels of investment.
My next step is to go to one of the crowdfunding sites and post my idea, with the two-minute teaser, making it available to people around the world to fund, from £1 a go.
You then rush to pay £1 or more into an escrow account, where the money is protected and can’t be withdrawn unless specified criteria is met – in my case, the target of £5,000. It then transfers the money to me – so long as 4,999 other people in the world share your enthusiasm for having a copy of my film.
In the wildly unlikely possibility (in this specific case) of the £5,000 target not being reached, the money is returned to you and all the other investors. In most cases, all the money would be returned though some sites might retain a proportion – it depends on the site.
Well-established in the USA
This type of funding has long been available in the USA as the US Securities and Exchange Commission (SEC) was quick to recognise the legality of such schemes, even though investors have far less protection on their investment than through regulated bodies like the stock exchange or investment funds. There, schemes like indiegogo (http://www.indiegogo.com) and kickstarter (http://www.kickstarter.com) have been used extensively to raise funding worldwide for short films and documentaries.
And now available in the UK
Here, the Financial Services Authority (FSA) has recently agreed a way of working for UK crowdfunding schemes and, now, schemes such as Crowdfunder™ back small creative projects (http://www.crowdfunder.co.uk) and business investments (http://crowdcube.com). There are also several other crowdfunding companies (see http://crowdfundingtoday.co.uk/directory).
Do they work?
And the answer is … yes. There have been examples of feature films raising nearly seven figure sums for production, including Spanner Films’ climate change documentary ‘The Age of Stupid’. This is probably the most written-about example of crowdfunding and, remarkably, it was UK based (http://www.spannerfilms.net/how_to_crowd_fund_your_film).
But only if …
The main point that has emerged in the development of crowdfunding is that the most successful projects all came with realistic business plans. At the February conference I attended, the owner and starter of www.crowdfunding.co.uk said that 90 per cent of the people who seek funding are turned down because they don’t have a business plan or a coherent business model. When a young entrepreneur asked, at that conference, whether he was eligible for crowdfunding, he was asked how much money he needed. When he replied “somewhere between £50,000 and £250,000” there was an instant groan because, even if you have a stunningly creative idea, you must present your investors with a coherent and accurately calculated amount.
So, perhaps my idea of a small documentary on business fundamentals is worth pursuing. Watch out crowdfunder.com, here I come!
If you would like to know more about crowdfunding, or other forms of finance, do email me on peter.savage@azule.co.uk and/or write to the TV Bay editor. For more information about us, or to read other articles in this series, look at our website: www.azule.co.uk.

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