Can Documentary Films Ever Be Viable for Financiers?

Here are some lessons learned in our bold attempt is to create profitable documentary films.

A year ago, my business partner Maria Springer and I wanted to do something revolutionary: we wanted to turn non-fiction filmmaking into a profitable business that can compete against any other business without subsidies. Of course, when you are attempting to create something that hasn't been done before, there should be reasons why one doesn't exist already.
Despite the odds, we remained bullish that the time was right for profitable documentaries to be born: with Netflix spending $6 billion on content this year and up to $8 billion on content next year, one could argue that there is a gold rush now taking place as Netflix, Amazon, Youtube Red, Apple, Hulu, VICE, HBO, and traditional TV networks all compete for similar, high-quality content.

Like in venture capital, you don't need every film you make to be a runaway success.

After a year of trial and error, we determined that creating a proper documentary film fund, that would get investors profitable returns—like they would get by investing in real estate, the stock market, startups, or other endeavors—does not make sense for the non-fiction film industry. It is way too unreliable. 
Though I am happy to report that we are in the black on our film EUROTRUMP, there are, quite simply, too many risks to guarantee profits for other films. The dozens of potential investors we spoke to about our ideas wanted to believe in our projections, but had trouble doing so. This is fair. (And the last thing I'd ever want to do is lose an investor's money!)

Stephen Robert Morse (right) on the set of 'EUROTRUMP'

This said, like in venture capital, you don't need every film you make to be a runaway success. If you make 10 films, one can be a huge success, two can pay back their costs and then some, and—if you have kept your costs under control—the remaining 7 projects can be utter duds. Yes, the above information took us a year to figure out (as we felt that we had to experiment and conduct our own practical due diligence before asking others for money), but we are extremely glad we didn't raise a proper fund on the wrong terms. 
However, Maria and I made assumptions in our initial analysis that were incorrect: 
1. We felt that we could drastically reduce the amount of time it took to make or finish and distribute products from years down to six months.
Yes, we made EUROTRUMP and had it air on VICE within nine months. But there's one big reason this didn't happen even faster: summer vacations. It seems like the entirety of the television and film industry (especially in Europe) is on vacation for the summer months. We would frequently call and email people and discovered so many vacation responders. This isn't a critique of the entertainment industry. When I used to work in startups, people would also infer that you have two seasons to raise money, spring and autumn, but I didn't realize how much this mentality would apply to film/TV projects. 
What's the fix for this? Plan in autumn. Shoot in spring. And, if possible, spend your summer months editing. Many people do this anyway as they want to hit the autumn Sundance Film Festival deadline. However, this likely may mean way more competition for your film projects if they fall on a similar timeline to everyone else's. The real reason this isn't a proper fix though is that documentaries frequently take more time than this to shoot. Only very specific, niche projects with clear start and end points can be completed in this strict timeline. 

Film festivals don't necessarily equal a return on investment. 

2. We also assumed that, when we invested to finish the projects created by others, they would be used to our grueling pace and also want to get projects out there and into the world quickly.
Unfortunately, the traditional path for independent films to get aired relies on them going on tour through festivals. Many filmmakers like getting respect in the film industry by attending these festivals, but this is a process that takes a year or more. (Again, there are few credible festivals between June and September, so this is yet another reason why summer is wiped off the filmmaking map.)
What's the fix for this? My approach has been multi-pronged. While film festivals are a lovely way to reach generally elite, liberal audiences in cities, they don't necessarily equal a return on investment. Yes, a victory at a film festival or two might boost the prospect that your film gets sold, but some films like EUROTRUMP, about a controversial politician, are going to be way too divisive to win film festival awards. Yes, my interest is in making money on film sales after films are made, because I have never been the recipient of a filmmaking grant. (Maybe one day that will change, but at this point, I've had to hustle my way through the filmmaking world like most indie filmmakers.) Thus, a fix for this problem is to be selling your film while it is going to film festivals. The two are not mutually exclusive, so long as your sales agent and/or distributor is amenable to this. 
3. We didn't factor in all of the personal and personnel risks involved in filmmaking.
Any film project is going to have major risks. Even after principal photography has been completed, there are still so many decisions from who to hire as an editor, what timeframe the team will complete the project in, and how the film will be prepped for sale. 
What's the fix for this? This question, I really don't have an answer to. I wonder frequently, why do some feature documentary projects get completed while others don't? Yes, I presume films that have received mega-funding from grants or donors will get finished, but, even then, there are truly a plethora of risk factors. 
What risk factors can we mitigate against? First, we can make sure a team has a strong track record of working together. Second, we can make sure the film is far along its road to being finished before we invest in it. Or, as we learned by doing, we can just create a film from start to finish ourselves. Ultimately, this latter option was the most effective way for us to fight against the team-related risks.
This led us to our next big idea: impact investing in non-fiction films. More on that soon