IndieVest works on a private placement model. First, it sells memberships with different tiers. A premiere portfolio membership costs $2,950 up front and $1,950 per year and allows the investors a look at its entire slate of film projects, as well as giving them visits to screenings. For $4,950 up front and $2,950 per year, the member gets other perks, including invites to film festivals such as Sundance. Bradley and his partners, including IndieVest Pictures President Mark Burton (executive producer of the Oscar-nominated film Water and a former partner with Hilary Swank) then offer investments in minimum units of $50,000 for a stake in the films. 
 
But the more intriguing aspect of the operation is that the company is guaranteeing distribution-the Holy Grail for filmmakers. When Bradley and his team put the companies together, they built it with three companies: a parent company, a studio/distributor and a securities firm.

"Our head of distribution was the president of distribution for Miramax and prior to that for well over a decade ran all domestic theatrical distribution for MGM," Bradley says. Besides raising the capital to produce the film and complete post-production, he says, the company also raises money for print and advertising. "We've combined all this under one roof."

Each film project is an LLC, and puts investor money in escrow at Deutsche Bank. The company dosen't begin spending any of the money on the film until 100% of the funds are already in place for pre-production, shooting and post-production. If the money is not used, it goes back to investors. That's one way to mitigate risk. The company then encourages investors to diversify by betting on more than one film.

In the case of Saint John of Las Vegas, 38 cents on the dollar went toward production, says Bradley, while 52 cents went toward the distribution. This makes the investors de facto distributors, he says, which means there is no one ahead of them in line to get paid, and they can receive first dollar gross on all revenues until they are paid back in full, plus a 15% preference fee. That means a 115% return before IndieVest makes money from distribution. After that, the investors keep 50% of net profits while the filmmakers share 40%, and IndieVest keeps 10%. IndieVest also owns the negative.

"When [Mark Burton] is looking at a feature film project, he's really looking at a number of different aspects and certainly keeping costs in line. The producers, the directors and writers are going to receive a fee up front. But it's going to be more at independent film standards. So it's not going to be a crazy amount of fees."

He says that the company sends out annual audits and quarterly financials so that investors will see where every dollar is spent. Beyond the 10% the company makes off the net profit of each film, IndieVest makes 10% off the syndication of the private placement through IndieVest securities. (The company, as a securities firm, is regulated by FINRA.)

"We'll only spend the first four to six weeks, $1.2 million to release it," Bradley says of Saint John. "If it gains in the market, we'll continue to deploy the set aside capital and grow the market share. If it's not gaining significant traction, we've already achieved our primary goal, which is a seven-figure release of the film, which opens up all of the ancillary distribution, which is where the highest margin areas are generated. And at the same time we have created significant buzz and awareness about the film so that it has a better chance of succeeding in the ancillary markets-you know, DVD rentals, sell-through, pay-per view, etc."

The company has also created a separate fund to buy finished products at film festivals and opened that up to investors in addition to its individual film projects. Individual investors can approach the company, but RIAs can also acquire placements on the company through Fidelity's platform.
The company targets an ambitious 17%-21.5% annualized net return over three years on the films. In the case of Saint John, 52%, or $5.2 million, of the total investment has been earmarked for theatrical distribution, but of the distribution money it is only spending 1.2 million in the first few weeks. If the film is not gaining traction with audiences after a few weeks, Bradley says, the rest of the money gets returned to investors. The goal is to return 50% to 70% of the investment if the film does not succeed.

The elephant in the room for investors, of course, is the audience. What if they don't want to see the movies? (And they usually don't.) Guaranteed distribution might get the filmmakers over the hump, but it won't matter if viewers and exhibitors don't like what they see. At the end of the day, this is still a risky, illiquid investment and while the distribution may be guaranteed, the investment cannot be.
"I hate to ask this," says Ginsburg, "but my question is, if this is such a good deal why do they need to go to the private capital market to get money?"

"We do mitigate the risks," Bradley says. "What we cannot mitigate completely is the subjective risk [that] people like the film. That we cannot control. Every film we put together has top-tier talent. It's professionally developed, professionally produced, professionally distributed and marketed. In that aspect you're mitigating as much as you can toward the subjective aspect. But at the end of the day, audiences either like it or they don't like it."