Principal Protected Film Fund Offers High Net Worth Investors 100% Protection

In late 2000, Chicago based producer and filmmaker Yuri Rutman did the unthinkable. After watching many dot-comers raise money from angel investors, Rutman did a similar thing. He posted some ads on the internet looking for movie money, got thousands of responses, emailed his business plan out, and within several weeks, an investor Rutman never physically met wired him money to make his first film “Mr. Id”, which was shot in Chicago.

”This was too good to be true”, Rutman stated. “To think I can get any high-net worth investor to just write me a check based on a business plan sounded like this would never end. Boy, was in for surprise”.

With cash in hand, Rutman went to L.A. and was able to convince the top-5 agencies to work with him in securing talent. “I knew back then, I couldn’t just get any name. So I went for the gold. A lot of smaller budget films get D level actors thinking it will help the film sell. It actually does more harm than good and you’d be surprised how many A/B level talent will work for nothing on a good project, especially if you have relationships with them or their agents/managers”.

Ultimately, “Mr. Id” had a smaller cast than he imagined (Ami Dolenz, Steve Parlavechhio), but, “at least I got an initial reputation among the Hollywood power brokers and reps for delivering the goods with private money and a good script”.

The Film was slowly licensed/sold all over the world, but did not get a large U.S. release or any major festival play. “I knew the odds were high of getting into Sundance or Toronto, what I didn’t know was really a wake-up all on what it takes to get a film into festivals that actually mean something”.

So Rutman went back to the drawing board to raise money for additional films, when everything just crashed. For about two years after 9/11, investors were not looking to invest in anything period. Especially a high-risk, mostly money losing proposition like the film business. So Rutman went back to his day job as a commercial and residential real estate broker at Keller Williams Lincoln Park.

But, then slowly things started to awaken. “You had all these high net worth guys like Fred Smith of FEDEX and Norman Waitt of Gateway Computers who financed “My Big Fat Greek Wedding”, as well as guys who were selling their companies for hundreds of millions of dollars getting into the film business. Marc Turtletaub from The Money store, Roger Marino from EMC Corp, former Chicago bulls co-owner Jim Stern, Jeff Skoll Of Ebay, Sidney Kimmel Of Jones Apparel Group, Minnesota Twins owner Bill Pohlad, real estate developers such as Bob Yari and others all started to bankroll films.

So Rutman knew he had to identify a similar high-new worth investor who always wanted to get into the film business for tax, vanity, or alternative investment reasons.

After meeting with dozens of “gazillioanres” for almost a two year period, “none of them wrote me a check. They all said the same thing, ‘We love your scripts, package, business plan, and personality, but there is no guarantee in this deal.”

Rutman had in place what a lot of Chicago filmmakers and producers lacked: packaged films with A/B talent, relationships with top agents, a risk minimization strategy that would spread the financing over multiple films, international distribution outfits and the ability to retain overseas sales in-house, and, relationships with what previously was a wake-up call for him: “There are maybe 5 or six guys in the world that can get a film into a major festival like Sundance or Toronto. I used to think that all it took was filling out an application, but you come to realize that you need a political machine involved in the picture along the way, no matter how good your film is”.

But with all this in place, there were still no takers because there was no 100% guarantees on capital.

In January, Rutman was in New York when a chance meeting with a hedge fund professional changed his outlook and strategy. “I couldn’t believe what I discovered. It seemed unreal. A lot of hedge funds in Asia and Europe were using a method of guaranteeing an investor’s return on principal 100%, even if the venture failed. SO I figured, why not use the same strategy for films. If I make 4-6 films, an investor could not only see a diverse revenue stream from several titles, but, in the worst case scenario, he gets 100% of his money back and its never at risk”.

Rutman was also educated that trying to raise small increments is not conducive and that his deal needs to have the same minimums that a hedge fund may have of 500,000 – 1,000,000 per investor.

After Rutman came back to Chicago, he tweaked his business plans to accommodate for a “Principal Protected Fund” and decided to set it as a 10 million dollar vehicle that can finance 4-6 films. “If I can get just one “SAW” which was made for under a million, or, do a $400,000 “Napoleon Dynamite”-type film , then this would be a real eye opener for not only high net worth investors, but private equity firms as well.

In fact, while historically venture capital firms, private equity firms, and hedge fund managers have shyed away from deals, Goldman Sachs is financing The Weinsteins’ new venture, Texas Pacific Group and Providence Equity Partners were involved in Sony's purchase of MGM, and other smaller funds are getting in the game as well.

People are pulling money out of the stock market, real estate is on an overbought level. There is a large window of opportunity now to finance films as the studios have consolidated their production by almost half, and have focused mostly on acquisition/distribution. This partly evidenced by the fact that in the last year or two, studios have been buying mostly novels, comic books, and video games so the time to develop those into a script to produce is 3-5 years, which leaves a huge deficit in production output.

“Where else can someone be able to not only have profit spread across a bunch of high end and sophisticated films, but have his money protected 100% ?”