One year ago, when we were launching OBSERVATORY, Maria and I formulated our thesis as follows: There are plenty of strong documentaries that don't get finished because they run out of money during the filmmaking process. Our goal was to help get these most worthy films get finished and purchased by large distributors while they are still relevant.
However, after a year of trying to prove our thesis, I now must admit that we simplified things way too much. There are a plethora of reasons why "good" films don't get finished. We learned quite a bit about these reasons while conducting due diligence on films that we were considering investing in. Here are the five biggest problems that we encountered that prevented us from investing in otherwise "good" projects:
1. Egos and trust. Quite frequently, I meet people who call themselves "directors" or "producers" who have egos the size of small countries. Oftentimes, such people have little to no work to show for themselves. This isn't comforting for me. For nearly six years, while I was making AMANDA KNOX, many of my closest friends didn't even know I was working on the project, as I didn't want to over-promise and under-deliver. Modesty is important for me. I know that if I invest in you I will have to work with you and everyone on your team for six months to a year. If people act liked they are Gods, this always rubs me the wrong way.
Furthermore, I need to be able to trust people before I invest in them. For example, we invested in a project this year called FREEDOM FOR THE WOLF. The people on this team had experience in both filmmaking but more importantly, in other relevant endeavors that gave us the social proof necessary to invest in them: Director Rupert Russell and Producer Patrick Hamm both have PhDs in sociology from Harvard (a relevant discipline for this film). And Producer Camilla Hall, who first approached me about working together, was a journalist at the Financial Times and had already directed a respectable film of her own, Copwatch. These are the kinds of track records that make me want to invest in a team.
The second test that I consider before investing in a team is the McKinsey Airport Test. If I were stuck in an airport with this person or this team for 6 hours, would I be happy, meh, or would I want to run away? Of course you should never invest in a person you wouldn't be happy to be with for a long period of time, because in reality you will have to spend long periods of time with these people.
2. No financial brains. I need to know that at least one person on a project, ideally the producer of that project, understands how film finance works. I am frequently flabbergasted when at film festivals I meet with production teams and they have 0 financial knowledge. I'm not saying you should go out and get an MBA (but it would be quite helpful!), but when I ask you about debt vs. equity financing, a very simple concept, and you tell me you don't know what that means, I am not going to invest in you, even if your film looks amazing, because I would fear losing my money and/or my investors' money. We are investing in films to make profits, not to fund your lifestyle. Remember that.
3. The project has already taken on too many investors. Working with other investors are the bane of any new investor's existence. Sometimes, a very worthy project will present itself to us but then we will conduct our due diligence and learn that, say, the French-German TV channel ARTE gave the film $100,000 in exchange for the right to air the film in in France and Germany. This then means that two large territories are off the table in terms of sales. It also means that the likelihood of selling the project to Netflix, Amazon, VICE or another global distributor is going to be impossible. Furthermore, the deals you likely have already procured might impact how fast and in what order we can get our money out of the project.
4. Budgets are out of whack. Quite frequently, a producer with an $850,000 budget will come to me and say "We are 40% of the way to being financed through the generosity for 10 different individuals and organizations." Such a high budget goes against my fundamental belief that you will ever be able to pay back your investors unless you're making a film about Lady Gaga or another A list celebrity. Even if you pay your team fairly and have to travel quite a bit to get your film made, it shouldn't cost $850,000. This is where I fundamentally disagree with other investors: I have worked on excellent films that have been made for $300,00 or less.
5. Irrelevance. All too frequently I have seen projects that might have been relevant a few years ago, but aren't necessarily relevant today. For example, if someone wanted to talk about small town government corruption in the United States before Donald Trump was elected to the presidency, the film likely would have been quite interesting. But today, in an era where there are much bigger fish to fry, that film is no longer relevant. How would I ever be able to sell a film that is irrelevant when there are likely 20 films out there that are relevant?
More often than not, the documentary projects we came across had more than one of the above problems. You can see how such things would be paired together: e.g. No financial brains and budgets that are out of whack would go together. So would the idea of coming in contact with egomaniacs who have created projects that are utterly irrelevant. If you can solve these problems, you will quite easily take yourself to a position in the top 2% of projects that we look at.
More observations coming soon...