Where next for crowdfunding – is staged finance the answer?
“Staged financing must become the film business’s immediate goal.”
– Ted Hope, September 2013
Over a series of blog posts I’ve been looking at some challenges that film and documentary are dealing with online. In a conclusion to the series looking at what can be done, I explore the limits and opportunities around crowdfunding.
Crowdfunding’s lack of sophistication around risk
Much of investment is about dealing with risk. A backer of a project – be that an equity or debt investor who is hoping to see some kind of profit, or a crowdfunding supporter who wants to get their perks and see the finished film – has to predict risk. Normally, the closer a project goes from idea to release – from pitch to screen – the lower that risk gets; in other words, it's reducing all the time. To reflect this, in the majority of business investments, the first ‘angel' investors will normally put in the least and get the most equity, and as subsequent funding rounds continue, new investors put in greater amounts and get less relative share, but more value as the business is now worth more. As risk decreases, the cost of participation increases, just as there are far more ideas that get turned into scripts than scripts that get made into movies, or movies that get a theatrical release.