PRINT THIS PAGE Why establish a VC fund for Israeli movies?
21/03/2006. Source:Israel Venture Capital Journal (IVCJ). Israeli producer and film/TV executive Avi Armoza, London film financier Andrew Somper of Scotts Atlantic, and Israeli film director Mihal Brezis.
What do My Big Fat Greek Wedding and Check Point Software have in common? Although the similarity may not be apparent, says the Israel Venture Capital Journal, a film is very much like a start-up. On the one hand, films have potential for tremendous returns. Pictures costing $5 million - My Big Fat Greek Wedding, for example - have gone on to gross over $350 million in box office revenues alone. On the other hand, like start-ups, they involve considerable risk, and even the most prominent producers admit that while experience has taught them to minimize failures, they are still unable to reliably spot the next hit.
Therefore, just like in high-tech, the key is having a diversified slate - about 25 films - not just one or two movies. This is precisely the reason why a fund model is so appropriate to the business, and what led us, after 20 years of international experience in the field, to establish KOLNOA-VC, a $25 million venture capital film fund.
A further comparison between the two sectors reveals some important advantages of a film fund over a high-tech fund:
- The recoupment timeframe of motion pictures is substantially quicker (about two years) and does not depend on an exit.
- Films are usually partly financed by state incentives, lowering the production costs.
- A main part of the revenue stream can be guaranteed in advance as long as risk mitigation procedures are in place, combined with carefully defined selection criteria.
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This article appeared in the Israel Venture Capital & Private Equity Journal (IVCJ). IVC Research Center publishes the Israel Venture Capital & Private Equity Journal, a quarterly review of trends and developments in the Israeli-related venture capital industry. IVCJ, distributed worldwide, is dedicated to provide wide-range coverage of Israel's venture capital industry. For more information please visit www.ivc-online.com
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