At the time, startup fundraising seemed simple enough to Jeff Annison and Paul Scanlan. Back in 2000, the two entrepreneurs were raising money for MobiTV, which eventually become the first company to stream live TV to phones. So they did what anyone trying to raise money would do -- they went to their friends and family.
Even though the total dollar amount wasn’t crazy, after checks from siblings, friends, and even a brother-in-law, Annison and Scanlan had a decent seed raise started. But when they took the checks to the bank, lawyers balked. Some of their friends and family weren’t accredited, meaning they couldn’t legally invest. An investment round sitting in their hands, ready to be used, and Annison and Scanlan found themselves having to return money.
Even after they ultimately raised over $100M to grow MobiTV into a worldwide market leader, the duo never forgot their first fundraising experience. In their eyes, there was something fundamentally wrong with not being able to accept money from regular investors.
Twelve years later, President Obama signed the JOBS Act, making regulation crowdfunding legal. Annison and Scanlan saw the news and immediately began brainstorming a new business. This was an opportunity to take advantage of new laws, yes, but also a chance to right a wrong in the system.
By the time regulation crowdfunding was legally enacted in May 2016, they’d created a business completely unique in the space. Legion M wasn’t just a company using the new laws to raise money. It was a company using the new laws to form the basis and philosophy of an entirely new type of business.
As the world’s first fan-owned entertainment company, Legion M has raised more than $3.2M from 6,500+ investors in two years of equity crowdfunding. They’ve invested in 4 movies so far -- including the recently released Bad Samaritan -- and have a slate of original content in the works. And with a stated goal of uniting 1 million fans as shareholders of the company, they expect to have many more rounds of equity crowdfunding in their future.
They are, for all intents and purposes, currently using the JOBS Act more effectively than almost any other company in the U.S.
”I think that a lot of people look at equity crowdfunding and think, ‘That’s just another way to raise money,’ ” Annison said. “But frankly, I think those people are missing the point. The true power of equity crowdfunding is creating a new type of company that's never been possible before the JOBS Act, a company owned by its most passionate customers. If you've got a company like that, it gives you a massive competitive advantage in your industry.”
Part of what makes Legion M’s fundraising strategy unique is the desire for members over dollars. Instead of trying to raise as much money as possible, Annison and Scanlan focused on signing up any and all potential investors.
This gets back to their model -- Legion M is an entertainment company owned and built by their fans. Being owned by the crowd is the foundation of the business. Members are constantly polled for their opinions on projects, asked to participate in scout programs at film festivals, and even encouraged to pitch their own ideas. As a result, it’s less beneficial to have 10 people investing $100,000 each than it is to have 10,000 people investing $100 each.
“Our competitive advantage compared to all the other studios out there is our community,” Scanlan said. “It's absolutely the core of our business, figuring out how to harness the power of this community, how to make it rewarding, and how to let the community be a part of it. That’s what differentiates us.”
By focusing on people and not huge checks, Legion M has grown to over 30,000 members, including more than 6,500 investors (members don’t necessarily have to invest -- you can also join the community for free). This community growth has allowed them to already invest in 4 films.
Bad Samaritan, which opened last week, is directed by Dean Devlin of Independence Day and Stargate fame. Mandy, starring Nicolas Cage, was a best-reviewed film at Sundance 2018 and is slated for mainstream release later this year. Field Guide to Evil, which premiered at SXSW and is directed by a select team of award-winning genre filmmakers from around the world, will also be released later this year. And in 2017, they teamed up with NEON Rated Nacho Viagalondo’s critically acclaimed Colossal, starring Anne Hathaway and Jason Sudeikis, which has since made many Top 10 Films of 2017 list.
Plus, an original slate of content is coming through the pipes. In 2017, Legion M shot a pilot with Stan Lee and Kevin Smith for a VR interview series called ICONS: Face to Face, a series they’re currently shopping. Plus, they’re currently developing Pitch Elevator, a digital series that takes the pitches normal people shopped in a literal elevator pitch at Comic Con.
Not all of these projects are necessarily unique to an entertainment company, but to Annison and Scanlan, they wouldn’t have happened without being fueled by the community.
“It comes down to our superpower, which is that we're fan-owned,” Annison said. “If Paul and I raised a few million dollars and were walking around trying to get these sorts of deals, they wouldn't be on the table. Stan Lee would not have worked with us. But the fact that we’re owned by fans opens doors. If we can be at this level now when we have 6,500 investors, as we grow to one million, we'll be unstoppable."