Raising money over the internet is pretty common, but when it comes to using cryptocurrency, it raises a few eyebrows. Goldfinch, an independent entertainment studio, and financier based in the UK has launched FF3, an extension of its First Flights funding program for emerging filmmakers. The first film project to launch on FF3 will be the horror-thriller “The Dead of Winter.” To shed light on the topic, we spoke to Chief Operating Officer, Phil McKenzie:
ST: Crypto crowdfunding is still in its early days. How did you come up with the idea of crypto crowdfunding for the short films?
PM: We had been looking at blockchain and tokens for a while, as it holds the potential to solve a lot of issues in the entertainment industry. When NFTs began to really trend in 2021, we thought this could be the practical or tangible way of getting the industry to adopt the tech.
In First Flights we already had a highly engaged creative community of filmmakers submitting projects, funding each other’s projects. There are increasingly limited options for emerging and established indie Filmmakers to develop, fund, and distribute their content. So we thought about how we can use web3 tech to really turbocharge what we already have to solve these problems. That led us to the idea of creating a crypto crowdfunding platform that will allow Filmmakers to allocate tokens to Patrons who provide them with funding in crypto. Token holders will be given access to tiers of NFT rewards along with priority access to the finished content and more.
ST: Filmmakers could have gotten monetary help from traditional sources? What difference does crypto crowdfunding make?
PM: There are fewer funding options for indie films and emerging filmmakers. What funding via crypto and the FF3 platform is trying to do is harness the power of web3, through tokens primarily, to better and more transparently reward patrons and ensure creative and commercial control remains with the filmmaker throughout the production and distribution process.
ST: How do you send the profit to investors? How does the accountancy work here?
PM: This functionality is being added in. Firstly we need to go through the legal process of ensuring our platform is compliant with FCA regulation for the promotion and execution of the investment. We have done this for a number of retail investment products we have been involved in. This will then mean that when a patron purchases their project tokens, which gives them access to the reward tiers, they will also be given a pro-rata share of the revenues.
For example, a filmmaker is willing to give us 50% of the film’s revenues to fully fund their project with 100 project tokens, then someone acquires 20 of these project tokens, that patron will get a 10% share of the overall project revenues, in addition to the other rewards they are given. All of this will be baked into the smart contracts of the tokens.
Ideally, payment for viewing the content will come in crypto, so it is easier to handle and distribute in line with the smart contracts, however, distribution channels and methods are slow to get here. So we are currently also in talks with various collections (who collect and distribute traditional film revenues) to provide their service and convert the fiat revenues into tokens for the patrons.
ST: What was the reaction of filmmakers when you told them about the plan? How did you convince them?
PM: Filmmakers love it as they like anything that can help them with funding. But in all seriousness, the problems we are trying to solve are major barriers to entry and barriers to continuing to do business in the sector. The filmmakers we have spoken to see FF3 and what we are doing as a way of solving these problems, and also helping to fund their content outside the very closed and traditional market structure that exists. So they fully buy into the vision. The challenge we have is onboarding and educating those filmmakers to use web3, which can still be complex to outsiders. However, our big focus in FF3 is to be as helpful and educational as we can be to the huge amount of crypto-curious people out there, breaking down the processes as much as possible for creatives and patrons alike. This was also our biggest learning from our first raise, we need to make things simpler and quicker, so watch this space for a more streamlined platform for our next raise.
ST: Crypto crowdfunding has a history of scams. What steps your organization has taken to combat the issue?
PM: First Flights has existed for a few years now and Goldfinch has existed for 8+ years, and all the team members are well-known within the entertainment industry. This sounds like a minor thing, but I think it is important that we have a reputation and profile that predates our involvement in web3 and shows us to be a credible business and people in general. And lastly, since the start of Goldfinch, we have set ourselves out to be a support for indie filmmakers and the conduit between investors and content creators, which is what our reputation is based on.