If it becomes mainstream and easy via an online platform you could have shows that are crowdfunded, it could open the door to getting more things produced than just safe commercial stuff. Thoughts?
Got $2,500 to take a serious risk with? Go fund your 401(k). Seriously - you are willing to take an estimated 80% chance that you will lose all or most of your investment? How many people are those kind of "fans"?
If you look carefully at the documentation on their website, they're already taking $250.00 at the start. Then if a show does recoup and there's a profit, they are taking 20% of your cut. It's absolutely ridiculous. Unless you've got a WICKED on your hands it's a losing proposition. It's truly for people who love the theatre and can afford to want to "buy" into a piece of it. I highly doubt there will be opening night tickets at those low investment levels. Please note the definition of "accredited investor."
I sort of like this idea. If this is what it takes to allow people who are passionate about theatre to be a PART of the industry they are passionate about at a low cost, let it be.
I am positive people all over the place would donate at a small price level, allowing them to have their first exposure to it. People who are thinking about producing but aren't sure if it's worth their time or money can start small, like any other investment, and see how it goes for them. Not to mention that if, say, they DO fund the next "Wicked" or "Mormon" they will feel comfortable taking bigger risks that they were once unsure of.
In terms of perks, I'm sure they get something. Even the smallest of donors, I'm sure, will get credited in some way, shape or form. Most shows can fill their house for opening night, but some scramble to do so. So, if this is one of those cases, they'll plan ahead on inviting some, if not ALL of their donors.
I could be wrong, but this could be something special.
"older rich people lol. I wouldnt do it cause i wouldnt risk it cause I work part time and go to school, but i thought it was interesting"
Or maybe the fact that this opportunity is still only open to accredited investors. It's more than just having a spare $2,500 lying around. You have to show that losing that money will not have an extreme impact on your finances, thus a minimum annual salary of $200,000, $300,000 joint salary with a spouse, or a net worth of $1,000,000.
It's an interesting concept and idea, but I believe the it will have limited success. So many crowd-sourced or pseudo-crowd sourced projects are trying to attract younger people, but the very few young people have the means to do it. It's not the $2500 minimum investment that's so challenging, but rather, the annual income or net worth rules that make this prohibitive for most people, young or old.
Investors are not investing in a show; they are investing in a fund that invests in shows. Have a show you believe in? Tough luck; you are not involved in deciding whether an investment will be made in it. Excited about opening night parties? Tough luck; you are not invited. Want house seats? Tough luck; your call will not be taken.
In essence, you are investing in a mini-mutual fund. Is it a good investment? Only you can decide that. The one thing we do know is that unlike a mutual fund that, depending on its terms, has hundreds or thousands of investments to choose between, this fund will have maybe 30 shows to choose from. Most of those shows, of course, will lose money, and many of the juiciest ones that are most likely to make a big profit will not be available to the fund.
Ken Davenport tried crowd-sourcing. Know how many people made money on that enterprise? One.
So yes, I could be wrong, but I am confident I am not. At least not regarding this idea.
But that's not how any kind of investment works. Let's say you're working with a CFP (someone in charge who knows what's going on). You give him 5k to invest in what he thinks has the chance of being the next big thing. A stock, we'll say. The stock amounts to nothing and you lose your entire investment. Do you expect your CFP or company issuing stock to repay you just because it tanked? Nope. If you do, you're delusional. Investing in anything--real estate, theater, bonds, stocks--has an inherent risk involved. That's why investment companies go as far as saying what the risk level is on something.
Everything I've invested, I do it with the mind set that if I'm lucky, it'll stay the same or gain value. If I'm not, I can handle things because of the risk I took.
No producer will ever pay back investors because their show flopped or didn't make it off the ground. That's not the way financial investments work.
Philly, I did my undergrad at a school with a large, well-established performing arts college. Every student was urged to take an Econ course and a basic business course. I did my MS work at one of the top performing arts colleges. The MT undergrads I taught all took an Econ class. Do it. It'll help you understand the business side of theater better.
And you don't know anything on so many different topics here. I bet if you went to an investment broker with your ideas, you'd probably be laughed right out of their office.
"I don't want the pretty lights to come and get me."-Homecoming 2005
"You can't pray away the gay."-Callie Torres on Grey's Anatomy.
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Hogan--tho this set-up calls itself a "fund"--it isnt really a mutual fund as you describe
it is an investment vehicle to give access to invest in shows at much lower entrance rate (in actuality its a multi-series LLC)
the investors DO get to choose which shows they'd like to invest in (one of the the series within the LLC)--so you'd be free to invest in one production being offered, and not another
Pays back investments if it flops????? That's not an investment, that's a loan shark.
To quote Goodfellas: "F*** you, pay me!"
If we're not having fun, then why are we doing it?
These are DISCUSSION boards, not mutual admiration boards. Discussion only occurs when we are willing to hear what others are thinking, regardless of whether it is alignment to our own thoughts.
"lol an econ class won't tell you about producing. Its just supply and demand bull**** and elasticity"
And anyone who wants to produce needs to know all of that. A smart student understands how concepts taught in an Econ or business are relatable to their chosen field. It's also called gaining skills you need to be a successful, productive, and contributing member of society.
I'm just as grateful for the courses that gave me my BA just as much as the courses that gave me my BFA.
it will allow people (accredited people) the oppty to "dip their toe" in the investing waters--for "only" $2500
it is easier to take a chance for this type of investment at $2500, then at the more standard $25000 currently required (and yes, there are lower exceptions at times)
the biggest hurdle for this concept, is if they will get the shows that people would want to invest in.
currently, they seem to only be offering one show--but this is a brand new venture and i hope/expect them to offer (many) more
Scott-Thanks for that info. That is not explained in the linked article. (I took "offerings on our platform are independently vetted, combined with our own evaluation of a show’s producing team and financials" to mean the fund would choose the investments.)
I am curious how this works in practice. I assume if someone chooses to invest in an offered show that does not aggregate to the minimum buy-in, it won't happen. And I assume if a show is oversubscribed, there is some formula for determining investments. The latter is not always an issue, because a lot of shows are scrambling for money, but it is of course also true that the "fund" will not have access to the highest tier of shows. To me, this is a vehicle for investing in the dregs (something that can often be accomplished directly for a show that is struggling to capitalize via the sale of fractional shares).
I'll hide and watch, but I don't expect to be hearing much about this in the future. (Nor do I plan to participate. )
re: the minimum to aggregate--the LLC has taken a small-ish position anyway, so any $$ not raised by investors would be taken up by the managing partners--so therefore, it would happen
re: oversubscribed--first come/first in
re: dregs: in the eye of the beholder/investor (tho i lean towards agreeing with you)
this is an interesting way to create investors, and if they do get a hit, the partners get 20%, without putting up their own money (so they may have extra incentive to offer "non-dregs")
I looked at their website after my last message. I will annotate a bit below.
"Here are some of MY assumptions: re: the minimum to aggregate--the LLC has taken a small-ish position anyway, so any $$ not raised by investors would be taken up by the managing partners--so therefore, it would happen
That is possible. I do note however that they reserve the right to refund money if they don't meet the commitment. (So you may not know for a while, depending on the situation, during which wait they have your money and you only get the amount invested returned.
re: oversubscribed--first come/first in
That makes sense. Again, how long are they holding your money? Or do they not take any more once they hit the predetermined amount?
re: dregs: in the eye of the beholder/investor (tho i lean towards agreeing with you) this is an interesting way to create investors, and if they do get a hit, the partners get 20%, without putting up their own money (so they may have extra incentive to offer "non-dregs")"
My point is that the managers don't really have the ability to offer a show that doesn't want to deal with them. That will include most of the premium shows (meaning the ones that are most likely to return a profit, and that invariably have a list of top tier producers who subscribe in much higher numbers). So what's left are the shows that have trouble raising money because they are long shots (what I am calling "the dregs"). And yes, I realize some of those shows will end up being successes, but that group also accounts for a disproportionate number of the (majority of) shows that lose money.
And now to that 20%. If someone just wants to roll the dice with $2500, I almost understand that. (People go to Vegas, after all.) But it really doesn't make investment sense to pay a fee of that size is you are making a serious investment. Even the most extreme investment managers would never dream of anywhere near that much.) And of course if you are investing significantly more than the minimum, it REALLY doesn't make sense, because you could likely direct invest with no fee. As I said before, no one is going to get much in the way of perks for $2500. (Anybody want a $2500 T-shirt?)
I just don't get it. But I do get that it's show business, and people signing up for bad deals are more common than playbills littering the floor after the audience goes home.
Any sensible "accredited investor" need not use a 'crowdfunding' platform or website to get a piece of the pie. If they're accredited and express an interest, someone will approach them about producing/investing... it just might not be the show they want. This model is inconsequential and will fail miserably after a year or two.