Crowdfunding Site EarlyShares Enters Entertainment Business

EarlyShares, an equity-based online crowdfunding platform, is moving into the entertainment business and has signed an agreement with 5x5 Media that will see the  producers of NBC's Fashion Star and TNT's The Hero starring Dwayne Johnson develop future projects via the EarlyShares site.

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EarlyShares says its online financing for film and TV projects differs from popular crowdfunding sites such as Kickstarter.com and IndieGoGo in that online users will invest directly, taking an equity stake in projects. On Kickstarter and other similar rewards-based platforms, users donate money to individual projects but do not receive any financial returns.

Projects from the fields of feature film, television, music and digital media are open to make their pitch to potential investors on EarlyShares' site. While EarlyShares says all sizes of projects are welcome, total investment from non-accredited investors is capped at $1 million per project, while investment from accredited investors is unlimited.

Stephen Temes, one of EarlyShares' co-founders, sees huge potential for producers willing to tap the resources of the crowd to bankroll their projects.

“A great number of great projects fail because they can't close that gap – that 15-30 percent of a budget – that prevents great projects from getting done,” Temes told THR.

Guy Zajonc, a producer at 5x5, also points to the advantage of using crowdfunding to test the commercial viability of new material.

“The question is 'who knows what an audience wants to see?' and the standard Hollywood line is 'nobody knows,” Zajonc told THR. “I will bet you every Oscar-winning film writer is walking around with at least one great script that no one wants to make. That's a script for crowdfunding...This new system of funding is going to create an explosion of creativity like the Internet but with better production values. A lot of it will be bad but a whole new level of good is going to emerge.”

SEC guidelines prevent Zajonc from pre-selling any of 5x5 Media's future crowdfunded projects but he said the company would initially be focusing on “small, smart ideas that have built in distribution. Projects that have a hard time finding a home right now.” He named Little Miss Sunshine and The King's Speech as two examples of the kind of independent productions that could work well in the crowdfunding space.

While enthusiastic about the Internet's potential for indie financing, Zajonc cautioned that he did not see crowd sourcing as an alternative to traditional funding for big budget productions.

“I could be wrong but I don't see how this fits with big budgets. Those are sophisticated and complicated deals,” he said.

The founders of EarlyShares will be hosting a live chat on their Facebook page on Dec. 12 to explain their system to interested producers and potential investors.