#Crowd-Funding: You have heard of Crowd Sourcing. But what is Crowd-Funding? + Story of a Bollywood movie ("I am") made at 8 Million USD. by 400 small individual Indian investors investing USD. 20,000 each !

From the link: http://en.wikipedia.org/wiki/Crowd_funding

Crowd funding (sometimes called crowd financing, crowd sourced capital, or street performer protocol) describes the collective cooperation, attention and trust by people who network and pool their money and other resources together, usually via the Internet, to support efforts initiated by other people or organizations. Crowd funding occurs for any variety of purposes, from disaster relief to citizen journalism to artists seeking support from fans, to political campaigns, to funding a startup company, movie or small business or creating free software.

Here is an example of how Crowd-Funding was used to produce a MOVIE in India (Bollywood):
http://www.indiatimes.com/bollywood/crowd-funding-an-emerging-trend-in-bollywood-15652.html

Crowd funding: An emerging trend in Bollywood
(Courtesy: Times of India)

Crowd-funding is an emerging trend in the world of finances, where a film maker sources the funds reaching out to the masses through social media. 

Small is Big: It is believed that this notion of funding will be of huge help to independent film makers and those who don't find funding for innovative concept of movies which don't follow regular Bollywood tastes. "The important part of crowd-funding is that film makers get finances from people who believe in their projects. It is a huge boost to those who find it difficult to generate finances through other means. We got funding for our out of the box subject. "I Am" is one of smallest budget films of 2011 in Bollywood which is one of largest film industries in the world. Getting a National Award for a film that has been funded this way is not a small deal," shares the director, Onir.

"Movie projects with a big starcast easily finds big production houses financing them. But when people don't have big names and 'masala' for movies, they end up running from pillar to post to seek finances. Crowd-funding does justice to those people. It encourages the creativity of film makers without any interference from production houses."

Risk Reduction: When hundreds of movies in Bollywood releasing every year don't find a good distribution and exhibition channel, crowd-funding is the safest option that reduces the risk of investment dividing the loss between many who are involved in the funding. This concept reduces the share of losses incurred. Thus it does not burden a single production house or an individual. This also lends transparency in financial dealings. The big name production houses can actually interfere with the work of the movie makers.

Money Matters: The people investing in movies not only get profit sharing in box-office collections but are also credited as co-producers in the movies. Says Onir, "All 400 investors in "I Am" got acknowledged as co-producers in the movie as well as being part of the profit sharing process. The amount pooled in for the movie was `3 crore." "I feel, it is extremely empowering to crowd-fund a film attaching more and more people. Our profit model is simple. Everyone invests `10 lakh and they are all out in the first recovery after investors get the principle amount back. Everyone gets a percentage from the profit. All investors are co-producers in my movie and everyone is happy."

The Bigger Picture: However, this funding process only works for small budget films. For lavish movies made on a budget of `100 crore - `150 crore, this financing process has no relevance. Says Onir, "Crowd sourcing is more for independent film makers. It is not meant for big budget movies with a huge star cast. The biggest disadvantage of crowd-funding is you can't raise a lot of money through it. That could be because it is an entirely new concept for the Indian market.

European connection: Another drawback of crowd- funding is that though the concept is doing good in the European market, Indian film makers find hard to attract investors from European countries. Guneet comes up with the solution for this problem. "One needs to structure the film well to access the European funds. One has to have a good script with an universal appeal that people from all over will like to be part of." Adds Puneet, "Typical Bollywood movies really can't find investors from the European market.