posted Nov 17, 2014, 11:26 PM by J Shaw
updated Nov 17, 2014, 11:27 PM
Imagine for a moment a crowdfunding site dedicated specifically to film and TV that combines a donation crowdfunding model (like Kickstarter) with equity crowdfunding. Imagine that this crowdfunding site had licensed securities professionals on staff to broker deals between investors and producers. Let’s go wild and imagine that it had a full set of standardized offering documents that producers could tailor to their specific offering right on line, and that the site handled filling the required securities forms for the offering. Well, it does exists and it’s called IndieCrowdFunder.com. (Full disclosure: I am an advisory board member for the company.) To date, there are donation sites (such as Kickstarter.com) and investment sites (such as Slated.com, Seeders.com in Europe, and its newly acquired subsidiary, Junction), but the two are not combined, and only Seeders.com in Europe has standardized documentation for investment offerings.
For a site that combines donations and investment, experienced producers can list their film, TV, and new media projects on the site and accept financing in the form of both donations and investment. Investors can join the site and search for projects using a number of criteria they like. If the site offers a standardized set of documents, it creates an efficient market and expedites the offering process, which can generally be modified to fit the details of the particular offering. Let’s look at how this will work in the near future, when the SEC issues final regulations implementing a new exemption from formal securities registration for certain offerings, generally referred to as “Regulation A+.” Here is quick summary of how it will turbo charge film financing:
- The investment can be offered to all investors, not just “accredited investors,” as long as their investment does not exceed 10% of the greater of their net worth or annual income.
- The offering can be advertised on the site.
- The offering can raise up to $50 million (as opposed to the paltry $1 million permitted under the current Rule 504 for non-accredited investors offerings).
- Under the proposed rules, it would preempt all state laws, which would eliminate huge roadblocks.
So now let’s think about what choice people donating money on Kickstarter would make if they had the alternative of getting an equity interest in the companies they were funding for the same amount of money. Instead of feeling like suckers, when some of these companies are later sold for millions (or billions), they could go along for the ride. It would allow the average person to invest, rather than just giving their money away to let others profit. This paradigm shift is the next step in film crowdfunding, and it is where a crowdfunding site that can broker investments will have a huge impact. Until the SEC implements Regulation A+, a site that brokers deals that comply with current securities laws and that combines that with donation funding, like IndieCrowdFunder.com, will have a huge advantage.There are some additional filing and auditing requirements, but they are not that onerous. So if you’re thinking, “gee, that is lax regulation for fairly large securities offerings,” keep in mind that there is noregulation of donation crowdfunding, where people are just giving their money away, and it is hard for an investment to do worse than that.
Posted from : http://www.forbes.com/sites/schuylermoore/2014/11/16/the-next-step-in-film-crowdfunding/