Don’t ignore the numbers, say investment experts to filmmakers
A panel discussion on ‘Making the Impossible Possible: Dating and Investor and Getting Funded’, on the second day of the FICCI FRAMES 2015 saw the participants focussing on the key value drivers that investors look at. The discussion, moderated by Mr Girish Menon, Director, Transactions and Restructuring, KPMG India Pvt. Ltd, centred on finding money to release small, medium and regional cinema at a profit. The participants were Mr Saurabh Srivastava, Co-founder and past Chairman, NASSCOM, IVCA and TIE and Co-founder, Indian Angel Network; Ms Padmaja Ruparel, CEO, Indian Angels Network; Mr Gautam Patel, MD, Zodius Capital; Mr Sanjay Nath, Blume Ventures; and Ms Nandini Mansinghka, Founder, Idyabooster.
Mr Srivastava spoke about how the success of investment in technology can be replicated in entertainment. “It’s all about venture capital,” he suggested. Today the manner in we communicate or travel, or even access healthcare and education has changed dramatically from a few years ago. This change has happened “because we found a way to finance innovation.” The old paradigm of low risk funding does not apply to innovative technology which is high risk. So new investment models that fund several innovations at a time with high annualised returns came into the market and that made Google, Facebook and Twitter possible. That hasn’t happened with movies because the dynamics of the investment structure are flawed. “The success rate is low because if you have a scenario where you cannot take it to enough people, then a movie that could make money will not, and people will not take risks.” In his opinion, this will change with the new technology that will disrupt how movies are made, distributed, and what screens they are made for.
Ms Ruparel shared her experience of two decades in the entrepreneur ecosystem. When she started, angel investment did not have the foothold that it has today. Today start-ups get a lot of backing. The work was hard, but it has brought them success. What worked for them was to leverage the expertise of “like minded people with different domain expertise to bring complementary strength.” They brought in huge value and created a mechanism where start-ups were able to thrive. Dropping costs and new technology are enabling content to get aggressive, which is what angels and venture capitalists look for. The good thing is that entertainment has its own chutzpah,” she added.
Mr Nath agreed that the investment climate has matured with the new disruptive technology. Highlighting the challenges, he said that there is a gap between media and entertainment executives and venture capitalists. E-commerce, on the other hand, is more investor friendly. “Companies are easier to evaluate because of the transactions. Content companies haven’t got funded because of monetisation.” Getting around monetisation will be a huge factor, he felt. He also saw a similarity in the movie or entertainment business and venture capitalism. Both are a ‘hits’ business. They talk to almost the same crowd, but there is a chasm in the way investors think, because the objective of investment is to make money.
Ms Mansinghka described her work as looking for a way “to reduce the entry barrier for people to invest in creative projects.” According to her, the challenges are that funding levels are higher, production houses are unwilling to experiment, and there is a differential in the primary objective of producers and investors. “When you go and pitch for money, you have to talk about numbers.” Without a change of mindset, investors will not come on board. She also felt that mere passion is not enough. “There has to be a business person who knows how to run this as a business that makes money.” Mr Srivastava agreed. “The risk-reward scenario needs to make sense.” Investors are willing to take risks; those investments that succeed should bring in good returns. “Position yourself as a savvy filmmaker. Don’t look at 10 million, see what you can do for one or two million.” he advised.