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Mike Merrill was the world’s first publicly traded person. In 2008, he started selling shares in his life for $1 a pop.
That means he’s uniquely qualified to run his new startup, Chroma Fund, which lets you IPO your own media projects, including indie video games, films, or any other endeavor you think could make a buck. You can’t IPO yourself, but you can IPO your creativity—which is pretty close.
The new company lets accredited investors buy shares in these media projects, and it has already helped fund two projects: a new video game from Mountain Machine Studios, and an educational web show for children called The Digits , which is available online through PBS Learning Media.
Unlike with popular crowdfunding services such as Kickstarter and Indie GoGo, the investors who back projects on Chroma Fund will get a cut of that project’s revenue. Backers aren’t buying equity in the company behind a particular project, but they are buying a type of security that essentially guarantees royalties in a product, explains Chroma Fund co-founder Marcus Estes.
Along with services like FlashFunders, Chroma Fund is the latest crowd-investing system enabled by the 2012 American JOBS Act, which lets companies publicly solicit funding, including online. Though such solicitation can only happen with accredited investors today, the idea is that project will eventually solicit from the general public as well, thanks to the long-delayed Section III of the JOBS Act.
Oregon has already passed its own laws allowing the general public to invest in local startups, and the Chroma Fund team adjusting for this change in the state. Estes thinks of it as a training for when crowd-investing becomes available at the national level.
Again unlike Kickstarter, Chroma Fund is only working with a small number of companies—not just anyone can sign-up a start a funding campaign. But as more capital becomes available, Chroma fund will be able to accept more projects. And Estes thinks that many other similar funds will emerge to help creators find new ways to finance projects. “We think this model going to eat Hollywood,” Estes says.
‘Let’s Do Both’
Estes and Merrill decided to start a company together about two years ago, shortly after Estes returned to Portland after a tour with Kanye West. Estes met the singer while working for a software consultancy that specialized in luxury fashion labels, and West hired the firm to work with his own fashion line. But soon, Estes found himself on tour as a story producer for a documentary series about West.
Legal disputes tanked the documentary project, but Estes returned to Portland with a renewed interest in filmmaking. “I was complaining to Mike that no one wanted to pay me to do anything but tech, but I was more interested in content,” Estes says. “Mike said: ‘Well, let’s do both.'”
After spending a couple years working on video game projects, the two realized that while tech startups generate huge amounts of money, media projects are often neglected, despite the huge revenue potential. Video games alone are a multi-billion dollar industry, but there’s not a way to invest in individual projects, as opposed to a video game studio. They realized that Merrill’s strange idea of selling shares in himself could be applied to other endeavors as well.
The Control Issue
They envisioned Chroma Fund as a way to help creators raise money, without giving up creative control of their projects. Creators can set their own terms for the projects, such as how much of the revenue is split with investors, whether to return investors’ money if funding goals are met, and how long investors receive royalties. Chroma and its lawyers create the contracts, verify revenue and disperse payments to investors.
Merrill and Estes joined Oregon Story Board, a startup incubator for entrepreneurs involved in digital story telling, to get the company off the ground. It was there that they met the founders of Mountain Machine Studio, the company behind the first projects backed by the Chroma Fund. Nick Lambert, co-founder of the game company, says it’s an ideal working situation. “We can just focus on our work, and we have total control over the project,” he says.
Estes and Merrill imagine a world in which pension funds are investing not just in stocks and bonds, but in video games, films and other media projects. But he thinks the bulk of the funding will always come from passionate fans who want to support their favorite creators’ media projects. Only now, those fans will actually be even more passionate, and even more likely to tell their friends about new projects, since they’ll actually be getting a cut of the proceeds.
“Chroma will help you build a street team,” Estes says. “But your street team actually gets paid.”
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