3 Secrets of Hollywood Entrepreneurs

David Worrell
Tue, 01 Jan 2013 00:00:00 +0000

Can you imagine planning a business that you knew would fail? Can you imagine looking for investors – then telling them that they would never get their money back?

Hard to imagine? I thought so too until I sat down with my friend Paul Scherzer. Paul told me the secrets to fund-raising in Hollywood, and I’m excited to share them with you because I know that every entrepreneur can use them. These tricks have helped Paul raise millions of dollars and produce dozens of award-winning movies and documentaries that have been shown around the world.

In fact, Paul has successfully used the money he’s raised from investors to travel all over the world making and showing his amazing films. He has shot film from Japan to Jordan, and Australia to Austria. And all of it – plus his generous pay – has been financed using the tips I’m going to share with you today.

The best part of this is that Paul’s strategies for raising money apply to every business. His hard-learned lessons about spreading risk, emphasizing non-financial rewards, creative collaboration, and … here’s my favorite … selling things that don’t exist, have transformed Paul’s life and earned his movies millions of dollars in the process.

You can use Paul’s insights no matter what business you are in, and I’ll show you how these three secrets can transform your business. Let’s get started.

Secret #1: Talk About the Nonfinancial Returns

You know that movies like the Harry Potter series and "Star Wars" make billions of dollars at the box office. But did you know that most films – and documentary films in particular – don’t even get shown in most theaters? So what attracts investors? “It's not the money,” says my friend Paul from his office in Toronto. “It’s the glamour aspect. Film has a certain cache, somewhat like the dot-coms had in the 90s or biotech has today.”

Some investors simply want to “go Hollywood” – to get a glimpse behind the camera and to have their names listed in the credits of a movie. Some love the thought of joining the crew during filming or even getting involved in planning the project. For these investors, it is about status, and Paul is happy to help them hobnob with the movie crowd.

In all my years raising money for companies, I’ve seen the same thing happen over and over and over. Investors like the “buzz” of new and exciting companies. They like to hang out with other investors and talk about what’s hot and new. Some will invest in a company simply for the chance to meet the other investors in the project, or to learn from a dynamic entrepreneur.

The Bottom Line: If your business is hip, high tech, or can generate any kind of buzz, investors will jump on board to be part of the fun. Emphasize the non-financial return to your investors.

Secret #2: Presell the World

This is my favorite advice from Paul. His single best source of funding comes from the “presale.” Paul literally calls broadcasters, theaters, DVD distributors, airlines, and anyone else who shows movies. He once presold Virgin Airlines! I love it.

In essence he’s taking purchase orders for a film that does not even exist yet. In some cases he has little more than a one-page description of the story and a rough timeline.

“You can presell the whole world if you know the market,” he told me.

But hang on – a presale is just a purchase order. It doesn’t come with cash attached. So now you’ve got to turn that contract into cash. That can be tricky – and expensive (interest is often well over 10 percent) – but presale-backed loans can put up 15 percent of the total fund-raising needed to start shooting.

The Bottom Line: Yes, this applies to your business too. Purchase order loans are available in many industries – I dare say all industries. If you can’t find a bank or finance company willing to front the money, it’s a good bet that an individual investor would be interested in using the PO as collateral for a loan.

Secret #3: Look for the Art in the Deal

If you’re thinking that you’ll never get enough money from those first two, hang on. Next, Paul told me the real source of most of his funding: a Canadian government agency called the National Film Board of Canada (NFB). Because the NFB wants to promote Canadian films, jobs, and the economy, it has given Paul money for documentary movies about everything from coffee and politics to tap dancing.

“There are agencies in nearly every country in the world that have budgets to support private projects that meet government goals,” he explains. And the best part? “The investment terms are far more generous than other sources.”

Before you say “that’s Canada,” remember, the United States and every other country have departments of commerce, small business divisions, and a million other government agencies that make grants and loans. I’ve seen the Department of Agriculture make startup loans to businesses in the U.S. Same with local and county agencies that want to support local entrepreneurs.

The Bottom Line: Whatever industry you are in, look for the government agencies that are related to you. If you are a landscaper or nurseryman, seek out the extension agency and the USDA or FDA. If you are into plumbing or natural resources, look to the city utility departments or the U.S. Department of the Interior. If you’re more high tech, go to the Department of Defense or DARPA or the USDOE. The money is there – get your share.

I hope you will consider how to apply these lessons to your own business.

Dedicated to your (unlimited) profits!??

David