On stage, a few months back, I quipped that indie was “more a24 than a16z”. Although it may have sounded nonchalant, there is a lot more thought, structure, and nuance than that off-handed comment might have suggested.
In most creative fields you tend to have BIG (studios, labels, publishers, etc) and indie versions. As we gear up for the reboot of indie, I’ve been going down the rabbit hole of the indie leaders in these various fields and what we can learn and apply to our own investing and company building.
One indie studio that has stood out in this exploration is Blumhouse and its founder Jason Blum. One thing in particular that stands out with Jason is his unapologetic commitment to destigmatizing the idea of “low-budget” films.
A few of my favorites from the podcasts linked above:
- Low budgets reduce risk and retain control
- Lower budgets lower the stakes
- Low budgets give you the freedom to say yes to risky/edgy/weird/cool stuff
- Low budgets let us work with incredible scripts and amazing artists that the big studios have passed over. They have something to prove
- Low-budget movies get better because they can’t rely on special effects or other expensive tricks
- If your job depends on big success your decisions won’t be bold, they’ll be vanilla
- The hardest thing to make is an edgy movie with a $200M budget
- Big budgets mean more people and more competing interests
- Infinite resources breed laziness
For Blumhouse, a low budget does not translate into a low return, in fact, quite the opposite:
Blumhouse’s own “Paranormal Activity,” shot in one house with two unknown actors and almost no crew, cost just $15,000, yet its box-office return since its 2009 release has been $193 million, a return on investment of about 1.3 million percent.
This appears to be a fairly consistent theme throughout Blumhouse’s movies- $5M or below budgets with gross sales north of $85M- in the case of Get Out or Happy Death Day far far north. Of course, there are inevitably some duds- another huge benefit of the low-budget approach is minimized losses with uncapped upside.
But if the low-budget, high-volume model is so financially compelling then why haven’t more copied Blum’s model? He posits:
The single biggest reason people don’t replicate the our model is EGO. Most people have their ego tied to their projects’ budgets. And for most people, sub-$5M movies “aren’t cool,” so it’s very tempting to think that if you have a big hit, you should make a much bigger movie next time.
Much of this echoes what we see in the world of startups.
Not dissimilar to big studios, “Big VC” need Marvel movie-esque outcomes to make their fund math work.
With the recent, and terminal, changes in the funding market, we may be entering the age of the low-budget startup. While Big VC is chasing metaphorical Marvel movies, that leaves a lot of surface area for the risky/edgy/weird/cool stuff to be funded and scaled with Blumhouse-esque filters and constraints.
This will likely be driven by founders who are willing to trade the vanity of measuring their ambition based on a valuation or amount raised for raising a couple of million dollars (or less) to get to profitability and control their own destiny and maintain their exit optionaility.
That’s at the core of our indie thesis:
- we’re about to see the biggest wave of SV-educated founders in history
- these founders will build independent, innovative businesses that will change the world
- they’ll look for new, more sustainable funding models that preserve optionality and control
Given Blumhoue’s focus on horror movies, it’s only fitting to think of how terrifying it would be for Big VC if the low-budget startup goes mainstream…