Johnny Depp, the Mortdecai flop, and Power of Expectations for entrepreneurs and indie film-makers

I’ve written in the past about how investing in indie filmsis like investing in startups.  Although there are also many differences between indie films and startups, today I’d like to further that analogy by using a very recently released film and its not so spectacular success.

Although most of the buzz in the film industry thus far in 2015 has been about the success (and controversy surrounding) American Sniper, an equal amount of anti-buzz is being generated inside the industry about Mortdecai, Johnny Depp’s latest big feature.  In this, I thought there was an important lesson for indie film-makers (and perhaps some startups entrepreneurs too) about expectations and setting yourself up for failure or success.

The reviews are in and Mortdecai, is already being called “one of the worst films of 2015” (quite an achievement since we are only 30 days into the new year), and simply “mortifying”. One article in particular caught my eye, “The Anatomy of a Flop”.   Production budget estimates range from $40 million to $60 million; while that’s not astronomical in the world of Hollywood movies, given that the first weekend gross for the film was only $4 million, it’s pretty hard to see how Lion’s Gate will make a profit on this film.

The funny thing is, I recall being approached over a year ago to invest in this film.  A friend in the indie film financing  contacted me and asked, “ would you be interested in investing in Johnny Depp’s latest film?”  If memory serves, they were hoping to raise the final $10 million or so for finishing the film from outside sources.  As a very big fan of Depp, I said I wanted more details.  I never got many more details beyond the fact that it was called “Mordecai”, Gwyneth Paltrow was co-starring, and they thought it was going to be a big hit!  

My first hesitation was that I was being approached at all to help provide “finishing funds” for a film that was funded by a major Hollywood studios and starred A-level actors.  If there's one thing that Hollywood studios have access to – it’s money.  Why was I, who usually invested in and made very low budget indie films, even being asked? It was a red flag, but not a deal killer.

The second red flag occurred when I dug in more to find out what the film was about.  I didn’t see the wide appeal of the movie or it being the best vehicle for Depp’s eccentric acting.  "But it’s Johnny Depp and Gwyneth Paltrow!" repeated my friend enthusiastically.  As far as I could tell, this seemed to be the only reason to invest in the movie.

I politely declined, since the movie wasn’t really my cup of tea personally, and I felt weird being a very small investor in such a big Hollywood production.  

I had learned that Mortdecai was based on a set of cult novels from the seventies about an eccentric/rogue art dealer.   While I like cult novels in general, I couldn’t see how I, as an individual investor, could possibly make money from such an expensive production (by most indie film standards, spending $60 million is like renting out Versailles for a full year just to have accommodations for a weekend trip to Paris).  

Moreover, given my recent experience with Hollywood accounting and distributors (which I’ll write more about another time), I realized the only way an indie investor would see even a dime would be if the film was a huge, huge hit (of which I was doubtful).

When the trailer and TV spots began to appear last year, I recognized the project, and though I’m a big fan of Johnny Depp and Gwyneth Paltrow (two of my favorite movies of all time are Ed Wood and Sliding Doors), the trailers were terrible enough for me to say pretty confidently that I didn’t even want to bother seeing it.

It kind of reminded me of another Depp outing that involved some kind of spying opposite another Hollywood leading lady: The Tourist, where Depp played opposite Angelina Jolie.  That movie, even though it was a financial success, was forgettable enough (and in my opinion terrible enough) that I can’t even tell you what it was about even though I went to the theater and sat through the whole film! If I strain my memory, I can vaguely remember something about sitting on a train with Jolie in Europe, and Johnny Depp walking on the roof in his pajamas – that’s about it.  Oh wait – there was a surprise ending.  Or was there? Honestly it was forgettable enough that I can’t really tell you how it ended.

The Tyranny of Expectations

I bring up this experience not to say “look how smart I was not to invest in this project” (any VC or angel investor in Silicon Valley worth his salt has invested in enough bombs, and passed up on enough hits to know that it’s not entirely a predictable thing).   Nor is my point here about how terrible the film has turned out - in fact, there are probably a modest number of people who enjoyed the movie and it’s quirkiness.   Actually, the fact that Mortdecai is now being called “one of the worst films of the year” made me more likely to go see it (perhaps in tribute to Depp’s great performance as Ed Wood, who was voted the worst filmmaker of all time!)

My point is actually a different one altogether.  The fact that this film, based on an obscure set of cult novels, was brought to mass market by a major studio spending $60 million dollars set up a certain set of expectations.  Anyone who has seen the previews and TV ads knows that Lion’s Gate must have spent a lot more on marketing – perhaps in the tens of millions – which means that to just break even the film would have to do well over $100 million! (not even counting exhibitor fees, distributor's fees, etc.).

Even for a passion project of Depp’s (since it was revealed that he was the driving force between bringing this one to market), it was marketed to the masses and released on thousands of screens because that’s the only way for it to match those lofty expectations.  This is the blockbuster formula used in Hollywood again and again – get the big stars, pay them a lot, market the hell out of the film with tens of millions more in TV marketing – and release it on as many screens as possible.

I want you to consider an alternate scenario:  what if Mortdecai had been brought out on a very small indie film budget, which is what happens to a lot of passion projects? 

Suppose, like most indie film-makers the film had been made for a few million dollars?  OK Depp wouldn’t have been able to afford to hire Paltrow or Ewan MacGregor, or even pay himself a multi-million dollar salary.   Suppose also that the film had done $4 million in total box office, bringing out fans of the novels and some subset of fans of Johnny Depp? 

The film, even if it was as terrible as it is now, would be a financial success and not, as many industry insiders are calling it now, “Johnny Depp’s fifth flop in a row!”  My point about this film (and many others) is that perhaps the film might have done better with lower expectations and found a niche audience of people who are into these kinds of movies?

Now I’ve never met Johnny Depp personally, so have no idea if he would do a film without his usual multi-million dollar payday, but the point is that there are some films that are never going to be “mass market” films. This is why there’s an “indie” film industry – for financing those passion projects that may not appeal to “mass audiences”.

I’ve seen the same phenomenon in the software industry in Silicon Valley, where investors pump millions of dollars behind teams that try to grow their initial small product idea into a big company very fast.  Many of these efforts fail, partly because of the amount of money they spend trying to “get there”. 

It’s not the investors who are to blame, it’s also the entrepreneurs who eagerly go out and try to raise millions of dollars to become the next “big thing”.

There are many startup product ideas which would work great if treated as a small, bootstrapped company; but, when they are treated as if they could be the next Uber or Twitter or Facebook, they ultimately fail.  By raising a lot of money in the startup world, you eventually end up spending it, and if the product hasn’t met the lofty expectations that you set when raising money, you’re suddenly out of money and the company dies. 

Moreover, because you raised VC money, you tend to have hired a very expensive team of VP’s and other key personnel to bring the product to market, who aren’t going to stick around when the money runs out. 

Hell, the founders have little incentive to stick around when the money runs out because of the way that VC deals are structured – they get their money out first, and unless the company/product is a stellar success, there’s no way that the founders are going to have it be a financial success.

These VC-backed companies, like Mortdecai, I would argue, are a victim of their own expectations.

In many ways, when you raise money for your startup or for your film, by setting a certain budget, you are implicitly (or explicitly) creating a set of expectations.

If I asked you to jump over a bar, and gave you the option of how high the “bar” should be set that you have to jump over, what would you say? If you wanted to be sure you would jump over it, you’d probably say to keep the bar pretty low and would easily step over it. 

However, as a startup founder or film-maker, when you raise money, you are basically being asked how “high” a bar would you like to set for yourself and your project?

Inevitably, most entrepreneurs and indie filmmakers will set the bar as high as possible and try to raise as much money as possible.  Most indie filmmakers would love to get a $40 million budget for their adaption of an obscure set of cult novels into film.  Similarly, most entrepreneurs would love to raise $5 or $10 million or more in their series A financing. 

In both cases, you’re creating a set of expectations for how well your film (or startup) will need to meet in order to  not be considered a “flop”.

So, Mr. Indie Film-maker, and Mr. Entrepreneur, ask yourself for your next project, how high do you want the bar to be set?

Zen Entrepreneurship : Second Edition Now Available and a Bestseller!

“I started meditating, a path of personal growth, because I thought it could help accelerate my career. By the time I was done, I would begin to view my career as a way of accelerating my personal growth. I realized I had it backwards.”

                        -from Zen Entrepreneurship, Rizwan Virk

The second, expanded edition of my book, Zen Entrepreneurship: Walking the Path of the Career Warrior – was launched on Amazon recently and I'm happy to announce it's become an international bestseller in four countries!

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What is this book about?

Zen Entrepreneurship reads like 3 books rolled into one:  a business tale, a spiritual adventure, and a handbook.

On one level, it’s the story of my very first startup, which I founded with my  good friend from MIT, Mitch Liu.  We didn’t really know what we were doing, but were very ambitious and to our surprise, the startup took off, and for a while it was one of the hottest startups on the East coast.  We had numerous articles written about us and Information Week called us one of 8 startups that CIOs of major corporations should watch. One this level, the book can be read as an interesting “startup tale”.

On another level, it’s a book about a path of spiritual growth.  Around this same time, I started meditating and working with a set of spiritual teachers and learning about “the hidden worlds”.  Back in those days, I didn’t care much about spiritual growth – or topics like dreams, finding my calling in life, karma, energetic patterns, synchronicity – I just wanted something that would help me mentally focus and have the mental stamina that a startup requires.  What I found was that the two were interrelated - more than I realized.  At this level, you can read it as a "tale of power" of a student being mentored - like The Way of the Peaceful Warrior, or the Teachings of don Juan. 

The third level, which is the most important in my opinion, is that this book is a handbook for bringing spiritual development and your work into one.  The Buddha once said: “Your work in life is to find your work and give your heart to it!”.  Rather than having your personal growth “over here”, while your work and your career is “over there”, the book describes the “Path of the Career Warrior”, which is a way to integrate the two paths into one.  In fact, the issues you are struggling with in your personal life and/or your meditation, are the same issues you will likely be dealing with in your career. If you have a startup, it’s even worse!

What have people said about the book?

“Tales of Power meets the Peaceful Warrior... in Silicon Valley! It's entertaining, humble, insightful and valuable - not just to entrepreneurs, but to anyone looking to manifest their dreams and make a difference in the world.”


           —Foster Gamble, Creator and Host, Thrive: What on Earth Will It Take

“You will come away with insight about yourself, guidance … and knowledge that you may not be able to acquire anywhere else save the mountaintops of the Himalayas.”


—Bookreview.com

 “Riz Virk brings the wisdom of ancient Eastern traditions into a purely Western setting. The result is an often hilarious but always insightful book that will change how you view career success and help you discover and walk your own unique path.”


—Marc Allen, author of Visionary Business, CEO and co-founder of New World Library

“Zen Entrepreneurship changed my life, it confirmed for me that 'clues' exist in the world around us and are powerful. I shared this book with every one of my clients from that point forward. Powerful. A must read... it reinforces that there is a bigger guide within us if we choose to listen”


—Lorin Beller, author of From Entrepreneur to Big Fish: 7 Principles of Wild Succes

What’s new in the second edition?

There’s at least 50 pages of new content based on feedback from readers in the years since I wrote the first edition  The new content transforms the book from a “fun story tor read” to a handbook, with summaries, principles, and exercises at the end of each chapter.

Many readers have told me they go back to the book every year to “refresh” on some of the business and spiritual principles described in the  story.  The second edition is  definitely the one to do this with – this edition is both a story and a manual for living the 14 principles of the Career Warrior.

Where can I get it?  What’s special on June 4^th!

If you buy the book June 4^th, you will receive a set of bonus gifts, worth hundreds of dollars from myself and other bestselling authors, spiritual and business coaches/advisors.  This includes a preview of my next book about synchronicity, Treasure Hunt,  an ebook from Betsy Chaisse, co creator of the wildly popular film, What the Bleep do we know?, Magical mystical images from visionary artist Ellen Mcdonough, and many, many more!

Special Promotion is here:  http://www.zenentrepreneur.com/book

Buy it here:   http://www.amazon.com/dp/0983056919/

Follow me on Facebook: http://www.facebook.com/zenentrepreneur

angel investing: top 5 reasons why indie films are like startups

When I tell people that I’ve been an angel investor for five years, they naturally assume I mean investing in tech startups. I do live in Silicon Valley after all, and it is true that since 2007, I have invested in a number of successful (and some not-very-successful) startups. 

But that same year, I also did my very first investment in an independent film, and I’ve learned a lot about that industry in the past five years. I think it’s a good time to reflect back.

Incredibly, the number one question I get asked by people who have no problem with the idea of investing in the latest unproven iPhone app or social gaming company is:  Aren’t independent films really, really risky??

You bet they are. But then again, so are tech startups.  

It’s rumored that 90% of startups and 90% of indie films don’t make any money for their investors.   I don’t know for certain, but my guess is that the failure rate of startups may actually be higher than independent films. 

The main difference is that when a startup fails (and they do, often, trust me – in the press we usually only hear about the successful ones), as an investor you usually end up with nothing less than the clichéd worthless stock certificates that you can use as wallpaper in your bathroom!

At least with a film, even if it’s not a financial success, you have a finished product that you can watch and recommend and enjoy.  And when a film is both an artistic and financial success, it can be rewarding in ways that most tech startups never approach.

In fact, I got involved in film investing for the same reason that I got involved in startup investing – as a way to help entrepreneurs who had an idea that they wanted to bring to the world.  Since then I’ve invested in and become an executive producer of quite a few indie films (see my imdb page for some of them) – starting with smaller budget films like Turqouise Rose and Raspberry Magic, and more recently higher visibility projects like the visually stunning and insightful documentary Thrive: What on Earth Will It Take? and the upcoming horror/fantasy flick Knights of Badassdom.

Unlike startups though, there isn’t really a good eco-system for angel investing in films, and young film-makers usually struggle to get their first film made. Similarly most angel investors are at a loss when navigating the treacherous waters of Hollywood.

That’s how I got involved in my first film, shot on the Navajo reservation in the Four Corners region of Arizona.  Travis Hamilton, a young film-maker fresh out of film school, had a vision for a film about a Navajo girl.  Not only did he not have a track record, but he was in a very un-commercial genre, and most seasoned investors weren’t going to give money to him, (you can read a little bit about this investment in an article in the wall street journal blog which mentioned my first investment, and a group called Film Angels that I’m a part of in Silicon Valley,  here ).

But like startups, when they go right, indie films can be quite lucrative (think My Big Fat Greek Wedding).   So in support of independent film-makers everywhere, and to encourage my fellow Silicon Valley angel investors (of which there are lots) to support film entrepreneurs (of which there are also lots), here are my top 5 reasons why investing in independent films is like investing in tech startups:

1.  It all begins with an entrepreneur and an idea, usually one that nobody will fund because “it’s too risky”.  OK, so not exactly.  In film it usually starts with a script or a book.  In many smaller budget indie films, the scriptwriter is often the director and main producer, meaning that they’re basically a one-man show.  Usually filmmakers who think of themselves as entrepreneurs and not “creative types” are more likely to get their project off the ground.
   
   
2.      You have to pitch to “the big boys”, but usually it’s usually small money that gets a project off the ground. Just like entrepreneurs here in Silicon Valley, who pitch too early and too often to “the big boys”, the venture capital firms on Sand Hill Road, so filmmakers end up pitching to studios.  Like studios, VC firms will turn down most of the pitches they hear and invest in only a few per year.  Like entrepreneurs, filmmakers who have been turned down have to find angels to invest in their projects.  Many big budget films start off as options on literary properties.   A few years ago I met one of the guys who bought the movie rights to Batman in 1980, and it took almost a whole decade before it became a big budget production.   Of course, like entrepreneurs who take too much VC money and lose control of their company, this can happen if you go the standard Hollywood route.   In this case, the original Batman rights holders lost control of the project creatively and financially.   The alternative to studio money is to go the independent route, where filmmakers can keep more creative control and influence their productions.
   
   
3.      Later stage investments are less risky than earlier stage investments.  While most of us in Silicon Valley know about startup investments – seed round, series A, series B, late stage, etc., I didn’t really understand that the same is true for film.  The stages are a bit different – usually the development stage can begin even before the script has been written, then there’s pre-production, production, post-production, and then distribution – which involves p&a funds (print and advertising) for a theatrical release.  It turns out that just like investing in a late stage company is usually less risky than investing in two guys and a business plan, so the later stage investments tend to be less risk - i.e. think DST’s investment in Facebook after it was already successful.  In fact, there are entire funds dedicated to providing finishing funds for a film and p&a monies to films.
4.      It’s all about distribution.  While a few startups succeed because they have a great product, most succeed because of their distribution channels – getting a good product to the target market.  The same is true of indie films – the films which are successful financially are usually the ones who understand the distribution side of the business and have a core audience that they are able to reach.  Not all films gets theatrical distribution – this is a fact of the film industry, but film-makers who understand this are the ones who are prepared for it.  Most profits from most films actually come from DVD releases, not the box office numbers that the press focuses on.  Of course the more anticipated a film is, the easier it is to get the right distribution channels in place.
   
   
5.      Stars are helpful, but not necessary. In the startup world, VC’s love to invest in entrepreneurs who’ve “been there and done that”.  In films, it’s even more pronounced – even a smaller budget indie film can benefit from having a star  - think Bill Murray in Lost in Translation.  But television stars can be a great boon to an indie film too - in my upcoming film Knights of Badassdom, we are lucky enough to have Peter Dinklage, who won an emmy for Game of Thrones, along with Summer Glau, who made fan-boy fame in the Firefly and The Terminator: The Sarah Conner Chronicles and Ryan Kwanten, of True Blood fame.
   The most innovative filmmakers are able to get B or C-list stars to make brief appearances in their films, and that’s enough to get the film going.  But it’s also possible to have a breakout hit with no well known stars – think of Bend It Like Beckham, which launched the careers of Keira Kneightly and Parminder Nagra.   The same is true of startups – while it would be nice to invest in Mark Zuckerburg’s new company (if he ever leaves Facebook), it’s probably more profitable (and likely) to invest in the next Mark Zuckerburg who’s starting the next big thing.
   

Well that’s a very quick overview on what is a pretty complex topic. Of course there are also many reasons why film investing is DIFFERENT like startup investing, and maybe I’ll list those in another post.

In the meantime, if you are thinking about investing in a startup to support a tech entrepreneur, why not think about also investing in an indie film to support a film entrepreneur?