what is equity crowdfunding & how will it help you make your movie?

something very interesting happened a few weeks ago, and it could be huge for independent filmmakers.

the Security and Exchange Commission (the government agency that makes and enforces rules regarding investments here in the US) released a 453-page document, part of which outlines new rules regarding what has been referred to as “equity crowdfunding”. the difference between equity crowdfunding and regular crowdfunding might seem minor at first glance, but in that difference is something that could be completely game-changing.

whereas the crowdfunding that we all know is basically people asking their friends and relatives to help pay for something in exchange for thanks or a t-shirt or a digital download, equity crowdfunding is people helping to pay for something in exchange for a share of ownership – or equity – in that thing.

new_sitesthe 2011 JOBS Act (which stands for Jumpstart Our Business Start-ups) actually required the SEC to complete these rules back in December 2012, but they obviously blew that deadline by well over two years. whether that works for or against the fate of equity crowdfunding is still anybody’s guess. actually it seems that experts just can’t agree on pretty much anything related to equity crowdfunding. will it or will it not destroy venture capital? will it promote fraud or help excellent companies move from obscurity to success? is it just a big mess?

the only thing we know for a fact is that the SEC has FINALLY created rules and regulations regarding equity crowdfunding. whether or not it will be good for venture capitalists, small businesses or the country as a whole has yet to be tested, but now that these rules are out, this experiment has begun and we’ll see how it will all hash out over the coming months and years.

why is this something to which you as an independent filmmaker should be paying attention? well, imagine that you have a great idea for a movie or a TV show. you have more than just the script, mind you. you also know the audience for that particular type of film or show and you believe that you know how to reach them and get them interested. let’s say you and your friends also have the skills and experience to actually produce this film or show if you just had enough money to pay for the basics: food, gear, location, permits, insurance & time off from day gigs. that’s probably not much money considering. you could probably pull something off that a LOT of studios couldn’t just because of all their overhead. true indie filmmakers can spin gold from next to nothing.

secsuddenly equity crowdfunding starts to look a lot more interesting, doesn’t it? let’s say you’re looking to raise $100,000 on Kickstarter. if all you have to give back to your “investors” is a credit and a digital download, the amount you’re likely to get per regular person is not much. the average contribution per supporter on Kickstarter has at times been anywhere from $31 to $25. so assuming you could get $28 per contributor, you’d need nearly 3600 supporters to hit your target.

now on the other hand let’s suppose that a number of your supporters were convinced you’d succeed and that they’d like to benefit from your success. well, there are certain limits on equity crowdfunding. for instance, a company can raise no more than a $1 million through equity crowdfunding; equity crowdfunding investors can’t make more than $200,000 a year or have more than $1 million in equity and can give each company no more than $5000, but in the above example, assuming you were able to get each investor to give an average of $2500 per, you’d only need 40 investors to hit your goal.

40 is a LOT less than 3600. it’s still a lot of work, but if even one project succeeds through equity crowdfunding, that could change everything for indie content creators.

you still need to be smart about what you’re doing and how you’re doing it. you’ll still need to make a really convincing argument to raise that kind of money, but the success of equity crowdfunding could make it a very good time to be an independent content creator.