BRAID, a psychological thriller directed by award winning filmmaker Mitzi Peirone, and produced by Logan Steinhardt and Arielle Elwes, with legendary blockchain entrepreneur Joseph Lubin, founder of ConsenSys, as executive producer, is poised to become the first major feature film to be fully financed through an equity crowdsale using cryptocurrency.
The BRAID token sale, started on June 7, wants to raise $1.7 million in two weeks. The token sale, on the Ethereum blockchain, is conducted in partnership with Lubin’s ConsenSys and the equity crowdfunding portal WeiFund.
Financing films via “traditional” (yes, things change fast these days) crowdfunding campaigns powered by, for example, Kickstarter and Indiegogo, is not that new. But BRAID is introducing a disruptive twist: token holders will be equity holders, entitled to a share in the profits. The detailed proposition is: 100 percent of Adjusted Gross Proceeds will be paid out to token holders until they recover their initial investment, plus 15 percent interest. After this point, token holders will receive 30 of profits moving forward. It’s worth noting that BRAID team members won’t receive tokens, 100 percent of which will be sold to the public.
“Equity crowdfunding can fundamentally change the way the film industry works, by solving many issues regarding financing in the independent world,” notes the BRAID token sale website. “Instead of a large studio funding a film, thousands (or millions) of people can become investors. All the equity holders are then incentivized to market and promote the film, which increases its chances of success. And most important of all, artists can maintain creative control and stay true to the original vision of their work.”
The current Initial Coin Offerings (ICOs) and token sales frenzy is disrupting the financing world, with projects now raising tens of millions of dollars in minutes. A story published in Huffington Post, titled “The Next Frontier of Film Finance: Ethereum Crowdsales,” notes that, until recently, ICOs were focused on raising money for blockchain tech startups primarily, but the BRAID token sales is breaking the pattern.
“What really got me married to the cause was seeing the status quo of Hollywood production studios just holding on to the same stories, holding on to the same formulas because they know it works,” said Peirone. “Meanwhile, independent filmmakers are struggling to get funds because all they can really use is Indiegogo and Kickstarter but they’re a donation, it’s like charity. I wouldn’t invest into one of those movies because it could go on to make millions [of dollars] and I wouldn’t see a return.”
In fact, the BRAID ICO is one of the first high-profile token sales for a “real world” project, beyond blockchain technology itself. “The Ethereum crowdsale for Braid is just the beginning,” concludes the Huffington Post story. “Blockchain technology is well-positioned to disrupt a wide range of industries and business processes in the future.”
It will be interesting to see how the BRAID initiative will extend the token economy to a real world project. The challenge is, how to win and keep trust: how can investors be sure that the BRAID team will really pay them the promised share of profits? The profits will come in cash and credit card payments, not in Ethereum tokens that can be automatically directed to a recipient by a smart contract, and the BRAID team will have to send the money to the token holders “manually.”
This seems to present some degree of risk for investors, unless the legal status of smart contracts is crystal clear with customer protection measures, or (even better) the banks themselves adopt blockchain-based smart contract technology.
UPDATE following feedback from ConsenSys:
The terms and conditions outlined in the purchase agreement for the BRAID Token Sale were written by Perkins Coie, a well-respected US based law firm. All contributors are protected via this agreement which can be found at the bottom of Braid’s campaign page.
Token holders will have the first rights to all revenue (income) the film generates up to $1.95 million (a 15% return on investment) before any revenue is taken by the production team. The remaining income (revenue) above $1.95 million will be split with 30% going to the token holders and 70% going to the production team.This is outlined in the purchase agreement that can be found at the bottom of the campaign page.
Picture from BRAID official trailer.