Before MySpace or Facebook, there was “virtual community” theGlobe.com, cofounded in 1994 by then 20-year-old Cornell student Stephan Paternot. The widely celebrated company enjoyed a stunning late 1998 IPO. Then the market nosedived, dragging theGlobe’s share prices with it, and Paternot was fast-tracked from media darling to symbol of preposterous excess. Perhaps unsurprisingly, he abandoned the idea of working as an entrepreneur again.
Until now. After spending the last decade as a seed-stage investor, Paternot has jumped back in to the world of startups with Slated, a months-old, still-in-beta online platform that hopes to aggregate an elite pool of investors with unfunded film projects that already have something going for them, like a name-brand director or popular actors.
The company will soon seek between $5 million and $10 million toward that goal, too. I talked with Paternot the other day about those plans. Our conversation has been edited for length.
Everyone wants to be an angel investor these days. Why would you rather be an entrepreneur again?
I enjoy investing. We’ve had half a dozen exits, including [ad retargeting startup] FetchBack, which sold to GSI Commerce [for $40 million in 2010, after raising just $1 million from investors]. GSI itself was then acquired by eBay [for $2.4 billion last year]. That was a 10x for us. Our other returns have been 4x to 5x, so we’ve been batting close to a thousand, which is pretty good.
So you’re still investing?
I am; I’m on my sixth [discrete pool of funding, from LPs that include his family and numerous angel investors]. In fact, I’ve been really focused on crowd-funding as an investor. I’m a backer of the [peer lending startup] Lending Club; [crowdfunding site] IndieGoGo; [the private company investing platform] CapLinked; and SecondMarket among others. I’ll keep making investments because they help keep me on the bleeding edge of every facet of what’s going on with crowdfunding.
But I’ve also been involved in film production over the last 10 years; I’d invested in and cofounded [film financing company] Palmstar Entertainment in 2004. And I’ve long wanted to advance the film industry using the Internet because I know how difficult and opaque and inefficient Hollywood is an industry. Slated marries both areas.
How involved are you with the startup?
It’s one of the biggest endeavors I’ve focused on since theGlobe. I’m sufficiently involved that it’s almost like being co-CEO, which I’m not. I met [founder] Duncan] cork through a fund advisor, we got together, I made a small investment, and we reworked the business plan. Now I spend 90 percent of my time on Slated.
How much has the company raised?
We’ve raised $4 million over two rounds. My fund is an investor; so are Barry Silbert [founder and CEO of SecondMarket], Daniel Borel [cofounder of Logitech], and about a dozen other angel investors, including from tech and the film industry.
Why should filmmakers use Slated instead of IndieGoGo or [competitor] Kickstarter?
Slated is akin to an AngelList for the film industry. We’re focused on attracting the top 10,000 people to the platform, including top producers and others who’ve won Oscars or been nominated. In fact, you can only get in if you’ve been invited or two members vouch for you. There are a lot of people who’d be apprehensive about going on to IndieGogo or Kickstarter but much less hesitant to join a premium marketplace where they’re rubbing shoulders with people they know.
What does Slated do, exactly?
Right now, Slated is just an introductory service, connecting production companies, film financing funds, studio representatives and distributors with promising film projects looking to raise between $1 million and $15 million. We’re making connections, and the participants are taking those exchanges offline.
Will you ever help filmmakers manage those relationships?
Yes, you’ll see Slated 2.0 – where we fully automate the process – later this year. Among other things, we’ll have standardized contracts that protect investors, so they won’t have to [hire] their lawyers to review every single contract. And we’ll automate things so that investors can simply wire the money into an escrow account managed by or in partnership with Slated.
Right now, if a filmmaker is raising less than $50,000 from an individual, it’s almost too expensive from an accounting or legal standpoint for the investor, because they can spend upwards of $10,000 on legal and accounting, which instantly erodes their profit margins. In fact, many high net worth individuals would probably rather spread $100,000 across five films, but it’s too inefficient and expensive to do that now; we’ll automate it so that it’s completely doable.
Will Slated take a credit on those films that get made? Are you serving as executive producers?
No, the goal of Slated is to be a completely neutral marketplace. But we’re ultimately going to become a broker-dealer so we can take a commission on the money [transacted] on Slated. It could take a few months; it could take up to a year. Right now, what we’re doing is free. But eventually, we want to be able to cater to all non-studio level films, meaning films [being made for] less than $100 million.
But you’re narrowing what you’re presenting to investors, right? How?
We don’t read the scripts. We’re agnostic when it comes to the material. We’re using social proof, looking for notable directors, a notable cast – projects that are financeable. Beyond that, executives choose for themselves which films to track.
Are you planning to raise more money for the next iteration of Slated?
We plan to do a Series C of $5 million to $10 million in the second half of this year. We want to be well-capitalized as we complete our broker-dealer application and set up a second office in L.A. that localizes [the service] for Europe, India, and China. We really think this is a winner-take-all model.
Last question: these crowdfunding services are great – until you fall short of your goal and watch what you’ve raised vanished. On Slated, what will happen to filmmakers who don’t hit their funding objectives?
Generally films can only be green-lit when the right amount of capital has been raised that meets the budget requirements. Usually what gets pushed is the close date, not a reduction of the budget, unless the film is rewritten to cost less. Slated does not enforce a hard close date; that’s up to the producer of the film.
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