APRIL 7, 2004

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BOLLYWOOD POSTCARD
By Vivek Wadhwa


A Tight Focus on Financing
Finding investors for a movie sure was harder than I expected. It took several creative changes in strategy before the cash was in hand

Back in my days as a tech CEO, I raised $20 million at sky-high valuations during the Internet bubble. I was even able to raise more money afterwards, albeit at much lower valuations, to help save my company. No surprise, then, that my new partners in the movie business saw me as a natural candidate for what turns out to be one of the hardest jobs in the entertainment industry -- raising funds for speculative movie projects.


I went into this expecting that everything would be different in this new world and that it would be governed by a different set of rules. After all, no financial bubble existed in the entertainment industry. Therefore, fund-raising should have been easier than in the post-bubble tech industry, right? Well, I was completely wrong.

SURPLUS OF EXCUSES.  My new adventure started when former investment banker Brad Listermann asked for my help in connecting with potential investors. I have written in past columns that his plan was to produce movies in Bollywood for one-tenth the cost of a comparable independent Hollywood production. He needed to raise $1.3 million to produce his first movie.

The numbers made sense, providing for a huge financial upside if everything went well. Besides, compared to investments in boring tech companies, an investment in this movie would be fun and exciting. Investors might get a chance to hobnob with famous directors and movie stars. It had something, in that sense, no tech company investment would ever have -- real sex appeal, beyond just making money.

I introduced Brad to investors who had made millions during the dot-com bubble and routinely put money into promising ventures. One after another, they declined to invest. They gave him the same old excuses that every entrepreneur looking for funding seems to hear these days: their investment dollars are maxed out; the plan is great, but they are tied up with other investments; no time to review the paperwork. Next, I had him speak to wealthy doctors, real estate moguls, and money managers, but it seemed everyone was quoting the same list of excuses.

GET ME REWRITE.  Brad, who had helped others raise millions of dollars for less promising business plans, was as surprised as I was. Every road led to a dead end. He had spent months on this effort and had little to show. So we decided to regroup and go to Plan B. Even though this was an entertainment-industry project, we would do things the tech-industry way.

In the tech, you always build companies one step at a time. You start off with a vision to change the world, devise a plan, raise enough money to get started, build a prototype, raise more money, and keep doing this until, finally, you have something that customers actually need. Then you figure out how to market what you built.

Along the way, you keep selling your vision and getting people to believe and invest in you. It must have been a technologist who invented the stock option, a brilliant way of assigning a value to something that has great potential but, as yet, doesn't really exist.

ROLLING START.  I asked Brad to rethink the budget and plan. I wanted something that would cost much less and that could be funded in stages. I also asked him to apply his investment-banking experience to create a payout structure that looked more like the stock options we were used to. These would provide higher rewards to investors who came aboard earlier -- rewards commensurate with the higher risk.

The plan I had in mind would also have all participants in this venture get minimal pay up front, provide an incentive to be creative in cutting costs, and work hard in return for a share of the profits.

After weeks of research, analysis, and lengthy discussions with producers and directors in both Bollywood and Hollywood, we crafted a plan that allowed us to get things rolling for $125,000. We could then take many shortcuts and shoot the film in digital format for another $125,000 and be ready to market this to distributors at film festivals. Once the project had started, we would also be free to scale up the entire production and revise the plans.

ONCE-BURNED.  With all the financial upside and Bollywood excitement, raising the first $125,000 would be easy right? Wrong again. This time I did the calling -- but I heard the same excuses. When I probed further, I learned that many propects had lost significant money in previous film-industry investments. This business has traditionally had questionable accounting practices and lacked financial discipline. Whenever potential investors called friends and business contacts to ask what others thought of a film investment, they heard horror stories.

And then I called a close friend, Gene Bedell, author of 3 Steps to Yes, the Gentle Art of Getting Your Way to see if I could get him to invest. His book talks about persuading people to do things by appealing to their personal needs. So, after understanding his needs, I had Brad offer to get Gene's son, Zach, a small role in the film, and have our families visit India together for the filming.

Gene, who has owned airplanes and Harley Davidson motorcycles, had just purchased a 200-acre farm in Virginia, so he was clearly not averse to spending money. He really wanted to do something special for his son, loved new adventures, and could easily afford an investment like this. So this should have been an easy sale.

Continued on next page>>  | 1 | 2



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