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jerryking : financing   9

The financiers who struck it rich on ‘Joker’
February 7, 2020 | Financial Times | by Anna Nicolaou in New York and Alex Barker in London

The movie "Joker" has been one of the most profitable comic book movies ever ($1.1bn in box-office sales on a modest $55m production budget).....Warner Bros was not the only one cashing in on the unlikely blockbuster. Other beneficiaries include: Canadian pension funds, mutual funds, insurance companies — and a pair of former investment bankers.....that external financiers were able to extract a lucrative share of the Joker’s profits underscores the timidity in parts of Hollywood, where major studios shy away from taking big risks — essentially anything that falls outside the universe of sequels and well-established franchise films. What Hollywood once derided as “dumb money” is, to an increasing extent, bankrolling some of Hollywood’s most daring creative bets.......Joker's director, Todd Phillips, was only able to gain Warner Bros' participation to back the film by signing on two co-financiers, Bron Creative and Village Roadshow, each chipping in about 20% of the production budget, thereby sharing the risk......Outside investors have been bankrolling films for a century, dating back to tycoon Howard Hughes in the 1920s. But within the business, are perceived as naive and spendthrift dupes, enamoured by Hollywood, who underestimate how unpredictable movie sales are......The major studios are making fewer movies, and even fewer ones that are not tied to existing franchises. They do not want to allow outside investors in on those movies, because they want to keep their expected riches. But for other films, such as adult dramas, studios are keen to hedge their risk.......Toronto-based, Jason Cloth, a former investment banker, runs Creative Wealth Media (CWM), which sources money from institutional investors such as pension funds and mutual funds.  CWM and production company Bron Studios, formed a joint venture in 2016 called Bron Creative.....who in turn, signed a $100m deal with Warner Bros in 2018 to finance a slate of films, which was how it got involved in Joker......Joker’s other financier, Village Roadshow, which has funded Warner Bros films for decades, is controlled by Vine Alternative Investments, a New York-based asset manager focused on the entertainment industry, and private equity group Falcon. Vine’s chief executive James Moore, a former investment banker for JPMorgan, said he noticed “there was a high correlation between how [entertainment] assets worked and how other assets in financial markets work”.........“They were long term durable cash flows that could be measured with a high degree of precision, and you could manage the risk if you managed them properly,”........Vine buys up libraries of old films and TV shows, which Mr Moore said are attractive because consumer demand for entertainment is “not terribly affected by recessions, capital market events or other exogenous factors”........the vast majority of the time when studios seek co-financing partners, sharing the risk is the right strategy......“Films based on new and unproven intellectual property carry significant financial risk that studios prudently share with outside financing partners,” Mr Ara said. “When it comes to predicting whether a picture will be a hit, as William Goldman famously said: ‘Nobody knows anything.’”.......James Cameron spent years trying to convince Fox to bankroll his futuristic science fiction movie featuring computer-generated aliens. Fox, which had been frustrated by Mr Cameron’s ballooning spending on their previous collaboration, Titanic, eventually agreed to finance Avatar. But only with the help of two private equity groups — Mr Mnuchin’s Dune Entertainment and Ingenious Media — which took on a reported 60 per cent of the financial risk. Avatar went on to break the record for global box-office sales.
asset_management  blockbusters  comic_books  entertainment_industry  films  filmmakers  financiers  financing  funding  Hollywood  investors  joint_ventures  movies  private_equity  producers  producer_mindset  risk-aversion  risk-sharing  sequels  Steven_Mnuchin  studios  timidity  Warner_Bros. 
5 weeks ago by jerryking
Venture capital investors should harpoon more whales
February 3, 2020 | Financial Times | by John Thornhill.

*VC: An American History by Tom Nicholas.
* The worry for Silicon Valley is that the impulse for creative destruction is now fading
* It is easy to be rude about the venture capital industry. So here goes. The criticism runs that the VC sector is full of too many over-funded, ill-disciplined chancers who pass off hype for reality, groupthink for insight and luck for good judgment.....What’s more, a staggering 95 per cent of VC firms fail to make a decent enough return to justify the risks their investors run......the current mindset of the VC industry is responsible for the slowdown in new business formation and lack of economic dynamism in the US. All too often, addicted to capital-light, metric-heavy software businesses, VCs are failing to bet big enough on the breakthrough technologies that tackle our biggest challenges, such as climate change or cancer.........Katie Rae, chief executive and managing partner of The Engine, a Boston-based “tough tech” venture fund, says that many VCs have lost sight of their original purpose......VCs were all about funding tech breakthroughs but that has got lost,” ...... “A lot of VCs look more like private equity companies that do not want to lose any money so they end up backing dog-walking apps rather than quantum computing.”......Historically, the best venture capitalists have performed a vital capitalistic function: turning seemingly outlandish ideas and transformative technologies into everyday realities. Semiconductors, recombinant insulin and internet search engines have all come to market largely thanks to VC backing........“The VC industry is cut-throat. .....It provides the capital and expertise for start-ups to succeed.”.......In VC: An American History, Tom Nicholas traces VC’s high-risk, high-reward mentality back to the 19th-century whaling industry, which developed a novel form of venture financing. The idea was to back an expert captain who could fit out a robust ship, hire the best crew and endure an average of 3.6 years at sea. On landing a whale, the captain would return investors’ money several times over. But many ships returned empty-handed or sunk.........the pattern of financial returns made by Gideon Allen & Sons, the smartest backers of whaling ventures, were almost identical to those achieved by Sequoia Capital, one of the best VC firms operating of the striking features of the subsequent evolution of the VC industry.......was how contingent it was on time, circumstance and people. The west coast model of VC investing, owed an enormous amount to massive government investments in technology during the cold war, the expansion of world-beating universities in California and the emergence of some remarkable entrepreneurs and visionary investors, such as Arthur Rock, Tom Perkins and Don Valentine.......The worry for Silicon Valley is that some of that Schumpeterian impulse for creative destruction is now fading. One argument has it that Silicon Valley is becoming increasingly “corporatised” with Big Tech firms, such as Google, Facebook and Apple, championing the mantra that “big is beautiful” in the face of emerging competition from China.

The benign view is that Big Tech may be internalising much of the innovation once carried out by start-ups; the malign interpretation is that Cupertino, California [JCK: that is, "Big Tech"] is snuffing out smaller rivals.......

“Silicon Valley is overdue a disruption. It is not a hotbed of start-ups any more,” ..........Metaphorically, at least, the VC industry needs to get back in the business of funding wildly ambitious entrepreneurs intent on harpooning some more whales.
19th_century  Arthur_Rock  big_bets  Big_Tech  books  breakthroughs  broad-based_scientific_enquiry  cancers  climate_change  creative_destruction  disruption  Don_Valentine  entrepreneur  finance  financing  fundamental_discoveries  funding  HBS  high-risk  high-reward  innovation  investors  Joseph_Schumpeter  moonshots  public_investments  semiconductors  Sequoia  Silicon_Valley  thinking_big  Tom_Perkins  tough_tech  unimaginative  vc  venture_capital  visionaries  whaling 
7 weeks ago by jerryking
Seth's Blog: Before you raise money (assets and expenses)
Here's the key thing you have to understand before you ask your mom or your friends or the local VC for an investment:

There's a huge difference between spending money on expenses and spending money to build an asset.

Ice at a picnic is an expense. Once it melts, it's gone. Your electric bill, rent--these are costs of doing business, and you should rarely if ever borrow money to pay them.

Assets, on the other hand, are things that sustain or grow in value, that you can use again and again, and that are ultimately worth more than they cost.

A college degree from the right institution is an asset. So is an earned list of 10,000 people who want to hear from you by email once a week. So is a reputation (which some people call a brand).

For entrepreneurs, then, the math is simple: any asset-building opportunity that will generate a long-term profit is worth considering and even worth borrowing money to acquire.


The reason for this money trap is that so many small-business owners confuse raising money for expenses with raising money to build an asset. This is worth understanding.

If you can say, "I will spend this money on X, and X will make Y happen, and Y will pay off handsomely," then a professional investor ought to be open to hearing that story.

But the things to spend money on are a significant real estate presence, machines, patents, a permanent, expensive brand. The entrepreneur who spends this money does it with enthusiasm, because she's buying things that are going to grow in value, fast.

This is the painting contractor who realizes that a high-powered industrial paint booth will make him the only guy in town who can do a certain kind of job. Or the fast food impresario who asserts that opening ten restaurants in one town in one year will give her the footprint to be more efficient and profitable.
funding  assets  Seth_Godin  expenses  financing 
may 2017 by jerryking
Ten Commandments of Raising Money
(1) Assume the $ is available.
(2)Know you lending/investing options.
(3)Know your lends/investors.
(4) Make sure s/he knows you.
(5) Ask before you need the money.
(6) Follow the principles of salesmanship.
(7) Ask for more than you need.
(8) Business plan of course.
(9) Make his/her job easier.
(10) Maintain the relationship.

"It's really important to think about what risk you are trying to reduce when you raise money - is it product risk, team risk, market risk or something else? Investors really want to know what milestone you are trying to reach with the money. "
funding  financing  banks  pitches  business_planning  investors  risk-management  product_risk  team_risk  market_risk 
july 2012 by jerryking
Leveraged Buyouts
July 1983 | Canadian Business | by Donald Hunter
buyouts  leverage  financing  mergers_&_acquisitions  LBOs 
june 2012 by jerryking
Bootstrap Finance: The Art of Start-ups
November-December 1992 | HBR | Amar Bhidé.

(1) get operational fast;
(2) look for quick break-even, cash-generating projects;
(3) offer high-value products or services that can sustain direct personal selling;
(4) don't try to hire the crack team;
(5) keep growth in check;
(6) focus on cash; and
(7) cultivate banks early.
HBR  bootstrapping  hustle  finance  funding  good_enough  start_ups  Amar_Bhidé  fast_followers  copycats  financing  entrepreneur  venture_capital  vc  execution  advice  capital_efficiency  team_risk  market_risk  technology_risk 
june 2012 by jerryking

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