In the initial proposal we asked a question about how you expected NESTA to make a return on any funding that it might provide? At that stage it was designed to start you thinking about this but also to give us an idea of where you were in your thinking about this. For the full proposal we need a much clearer idea of how you propose that NESTA should invest. Is it clear to you what form of investment is most appropriate for NESTA given the overall position e.g. royalty or equity? You should explain how you propose NESTA invests, on what basis you are making the proposal e.g. is it based on possible benchmarks derived from similar deals?
You should also use this question to tell us what other kind of support you might require from NESTA other than financial e.g. support-in-kind.
The most immediate return on NESTA's investment would be via the film funding model as per one of the following options:
* full repayment on day one of principal photography of "ten weeks in the head bin"
* full replayment on a sale of the "ten weeks in the bin" property outright
This is a standard repayment model for development investment in the film industry, and investment from any major studio would allow for full repayment of such monies.
Longer term commercial returns for NESTA, based on the company's success in opening a market for re-mixable films would come from an equity holding in the new company. In brackets are suggested rates:
• an equity stake in the company (5% ).
• a share of profits from licensed film assets of SANCTUARY (50%)
• license to commercially exploit SANCTUARY film assets
• license to commercially re-release SANCTUARY as an education or marketing tool for NESTA
• re-use of project online infrastructure for other NESTA projects (e.g. thequality.com technology and platform by which SANCTUARY assets will be commercially syndicated is the same by which NESTA awardee news could be syndicated)
As an advocate of open source development, the intention is to explore a new approach and if it works, let the framework take on a community life of its own. NESTA could exploit this to improve the visibility and sustainability of all its funded projects.
NESTA can leverage the pioneering status of this project to further establish its own profile in the marketplace. The project aims to produce commercially license-able assets that are attractive to 3rd parties seeking to leverage them.
Comments from IanP@nesta:
NESTA can't invest in "the completely unknown" but the focus of the proposal should be the idea and the practicality of realising it. They will not be assessing creative content, so figures at this stage are of secondary importance.
NESTA expect commercial and social return in 5-10 years. They will not impose crippling royalty rates as per EU regulations.
Models used in the past have been % royalty on sales, initial loan converting to equity holding. May increase royalty if risk is higher but want to see project done.
Posted by: .M. at October 27, 2003 11:50 AMNow that we are looking at the possibility of games industry investment for the core product, are we not looking a level of commerciality for the core product? If so, after we have paid off our advance to the games investors from royalties, should we not offer the surplus to NESTA as a more immediate return on funding than any of the above?
Posted by: ken at November 28, 2003 04:34 PMFrom Ian:
Significent risk with 10weeks being the primary route to recoupment. Need to offer something more of a sure thing for board.
Posted by: .M. at February 2, 2004 10:11 AM