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September 6 at 8:15am

Staged Financing MUST Become Film Biz’s Immediate Goal

By Ted Hope

Each day I become more and more convinced that staged financing could be a cure to much of the Film Biz’s ills.  Staged financing?  What?  Is the phrase not exactly center of your conversations right now?  Why not?!! Whatsamattawidyou? Don’t you know a good solution when you see one?

Although it already exists in many fields, and even in a few small patches of our own yard, I recognize that a staged financing strategy  is not yet the force behind Indieland’s own gardening. I am however growing convinced  it could yield a far more fruitful harvest than our current methods.  A staged-financing ecosystem can’t be built in a one-off manner though.  Although it also does not need to the rule of the realm, it needs a permanent eco-system to support it.

Staged financing is part of a much bigger solution that we urgently need to bring to our industry: a sustainable investor class.  We need smart money and need to stop seeking, encouraging, and propagating dumb money.  Most film investors get out, win or lose, by their third film (I have been told this and don’t have the stats to back it up now, but if you do, please share — otherwise just trust that is what my experience has shown). The value of most independent money in the film biz is the money itself, and that is not good for anyone.

Staged financing is exactly what it says to be.  I know in this world such literalness is a strange thing, but there is it. Staged financing is a funding process that is there for each distinct stage.  In comparison, it is the opposite of up-front financing — the type that monopolizes the narrative feature world. I am proposing that we institutionalize the staged-financing process and make it easier to finance your film in drips and drabs.  Why am I so bullish on what probably sounds like hell to many? Why do I think it will save indie film?  Let’s count the ways.

  1. Staged financing increases the predictability of success. Investors can base their continued commitment on a proof of prinicipal instead of just a pitch.  The longer one waits the more they know — of course the longer one waits the lower the chance for their to be the opportunity for investment, so there.  The more investors can project or even predict their success, the longer they will stay in the game, and the more that will gather to pay — i.e. more capital at play!
  2. Staged financing allows filmmakers and their supporters to pivot based on real world data. The old way had very little it could do when new information hit. Your film (and investment) could be rendered obsolete over night.  But that does not have to be a done deal is this new world. This is just one of the many reasons for #1 above of course.
  3. Staged financing diversifies the creative class.  Wouldn’t it be great if the film biz was actually a meritocracy?  Well, if people had to make good movies to complete their financing, wouldn’t that be a bit closer to the case? Staged financing gives all people the opportunity to prove they have a good idea, whether that idea is completed or not.  It is not about who you know, but about what you’ve done and can do.  Documentary film — compared to the narrative world — already has a great deal of staged financing institutionalized — and benefits from gender proportional representation among directors.  Need I say more?
  4. Staged financing allows ambitious artistic work to flourish.  Instead of just having “commercial elements”, unique and inspiring work can be recognized for the potential it truly has. Instead of being rewarded for being able to earn trust or arrogantly claim to know what one is doing,  staged financing allows good work to be rewarded for being good work.  Currently, we mistake confidence for capability and those that boast to be able to predict what the end product will be (where there is no way that they will actually know what the 100+ decisions each day will yield), get to play — not the work that delivers something new and wonderful.
  5. Staged financing rewards quality over risk mitigation.  Staged financing is actually a better form of risk mitigation than the present form that is only based on regurgitating what has already proven successful. When we limit risk by mimicking what has worked in the past, all we are doing is guessing and covering our ass — and this leads to a film culture of movie titles overrun with numerals.  We live in an era of abundance, and as comforting as the familiar may be, we have more access to it than ever before. We rarely need the new version of it.  We will however need truly original work more and more as time goes on as we will drowning in the repetitive.  How will we prove what works?  Staged financing, my friend, staged financing.
  6. Staged financing creates a better project as it incentivizes the creators every step of the way. Not that you truly need to incentivize those that are in the passion industries for the right reason, but it never hurts to weed out those that are in it for the wrong reason. When your financing is based on your work and not your connections or investors’ fears, you will do all you can to make each stage of financing shine, justify itself, and be truly competitive.  Staged financing requires you to walk a series of steps, proving you have earned the right with every advance — and you better do your homework if you don’t want to get left behind.
  7. Staged financing requires you choose your initial partners wisely.  It’s not just about the terms of the deal that should determine whom your investors are — but that is how we generally act nowadays.  Everyone should instead seek value-add investors.  You should get more than just money from your investors.  You should benefit from their expertise.  Filmmakers, agents, lawyers, and managers, often are willing to leap into bed with anyone who offers the most cash — there’s a name for that practice and it should not be film investment.
  8. Staged financing means the creators will have “skin in the game”.  When it is an up-front finance model, the creators are not working for a payout in success but working just for the upfornt fees (or some semblance thereof); they may have “profit participation” but basically the only anticipated earnings are what is in the budget.  It becomes increasingly difficult to motivate the creative team to be engaged in the needed work after the film premieres. Investors have long recognized that this is not the most beneficial arrangement, yet what can they do?  The answer my friend, is… yup, you know the song I am singing: everyone loves that staged financing!
  9. Staged financing is a time-tested process that has already been adopted by many industries.  Staged financing is the modus operandi of Silicon Valley and all the VC firms.  Other industries, from mining onwards, have seen real benefits from the process.  Why do we limit our success and not apply proven models to our field?  Could it be that somewhere someone is desperately clutching on to what ever paltry power they perceive themselves to possess?  Hmmm…  If they don’t offer the model you want at the store, build a new model — or maybe even a chain of stores.
  10. Staged financing gives producers of quality work more power.  The main objection to staged financing is that it gives financiers more power.  That is only true if you are making crap.  Or mediocre work.  If you are making something wonderfully astounding you will never struggle to progress to the next round — and in fact you will be able to improve your terms.  And investors won’t complain either, because they now can have to know a good thing when they see one.

So if Staged Financing is this marvelous thing, why have our leaders not yet delivered it to you?  Well, they don’t care about you; didn’t you know that?

And if Staged Financing could really save Indie Film, why has the community not constructed this marvelous ecosystem yet?  Well, we’ve all been too busy chasing shiny objects and marveling at the reflections fed back of us.

But change is here.  We have hope.  We can build it better together.  And I have already started. The San Francisco Film Society is committed to it. We have others who want to be part of.  We are have spots for more to join in.  And we are going to help a few select projects really rock this world.  

Watch this space.  Let’s do it together and truly astonish the world with your awe inspiring work.  Just don’t be slack, okay? 


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52 Comments

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  1. www / Sep 6 at 8:15am

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