5 ms·
Because it is uncertain if the IP will bring in any money -- because it has not done so in the past so far, has it?. If you can show you're already getting some
by galaxyLogic 5y ago
Because it is uncertain if the IP will bring in any money -- because it has not done so in the past so far, has it?. If you can show you're already getting some revenue out of the IP then I think you will have a good chance with the banks. They like existing businesses with existing cash-flow.
Garage sales typically bring in some value or at least the value of the goods is relatively easy to evaluate. Not so with IP.
- bombcar 5y agoThe way would be to show you have a company willing to purchase the IP at a certain amount, and borrow against that - but if you have that just get that company to invest. The dirty secret the banks know and the startups don’t want to admit is that much IP is worthless.
- b20000 5y agoever heard of “not invented here”? even if you have valuable IP big tech companies think they can do better even if they cannot, or are simply greedy and will spend a multiple of what your IP costs just so they don’t need to acquire you. that is what i’ve noticed. there is little logic or reason.
- galaxyLogic 5y agoKeep in mind that "big companies" consist of many "small people". If you offer them the IP for sale any decision-maker in the company that could approve paying for it will need to ask themselves: "How much would this help my career in this company personally? Or does it put me in risk of possible failure? Does it put me in competition with our other departments? How much would we need to invest our own time and efforts to integrate this IP into our product-line?".
- b20000 5y agoit is uncertain that the garage sale crap will bring in any money. or your inventory. besides, they discount it 90% anyway. people do buy and sell small businesses. why is a pizza place worth any money? because of the customer database? but that is IP too, so why does that have value? why do i need to pay 50K for that but the code i spent writing for 15 years has “no value”? even if a FAANG is doing something similar right now but their code sucks? i have had actual products in the market incorporating IP and the banks still think it is worth zero.
- b20000 5y agocurious how movie financing works and why banks would be ok with lending money against future movie IP.
- HillRat 5y agoFilm financing is ... complex, to say the least, but the classic debt financing model is backed by presale agreements, where you shop a package (script, director, actors, etc.) to distributors, who agree to buy territorial rights (which may include derivative rights to the IP, such as toys or novelizations); those contracts are then used as discountable collateral for the actual financing. (There are approximately 1,795 other ways film is financed, many requiring a comprehensive understanding of multiple national tax codes, but that's the way it used to be done.)
- b20000 5y agook, so a distributor thinks a movie will make $100MM, they buy the rights for $50MM, and the bank discounts this to $10MM, so they get a loan for $10MM?
- HillRat 5y agoApproximately, yep! For a variety of reasons this approach doesn't hold the pride of place it used to in the indie space; instead you see filmmakers taking on alternate funding, including equity, and then selling distribution at market (the idea here being that a good film with strong reviews will command higher prices after screening, particularly if streamers are interested). For smaller filmmakers, debt instruments are generally relegated to gap financing: high-risk and expensive loans that cover relatively small percentages (10-20%) of the total budget, and are backed less by secured contracts and more by the track record of the team package (including sales agent) -- basically, think mezzanine financing.
- b20000 5y agoweird film people can raise debt on their reputation without personal guarantees but tech people cannot