Fund matching site aims to give Chinese a chance to back American creativity, and get paid

Investors buy equity in a DreameGGs subsidiary in the Shanghai Free Trade Zone

Silicon Valley startup founder involved in introducing Lucasfilm and China Film Group

In a slowing Chinese economy, the movie business provides one of the rare bright spots, and investors wary of the country’s roller-coaster stock-market and moribund real-estate sector are keen to get a piece of the action.

Now DreameGGs, a startup private equity funding site based in Silicon Valley, hopes to link the talent and ideas of American filmmakers with investment from returns-hungry Chinese, and also to take Hollywood films to China’s booming movie market.

In its first few hours online this week, the startup’s Chinese language site attracted RMB 500,000 ($77,215).

“This is not just inviting people to register as a user, we’re talking about real money. It’s incredible,” DreameGGs CEO Lorelei Tong told China Film Insider.

The site lists a number of U.S. projects at various stages of completion seeking investment, including one from the creator of the Final Destination franchise.

Tong, who studied production at the Communication University of China in Beijing, worked in media in China after graduation, then moved to the United States.

The move from Beijing and Shanghai’s media world to the world of entertainment and technology in the U.S. eventually coalesced in Tong’s mind.

“I felt like I could do something to bridge the two film industries,” Tong said.

Her first attempt at bridge-building helped Lucasfilm representatives get to the Beijing Film Festival and then took China Film Group reps to Lucasfilm’s Skywalker ranch in California.

Tong says at the end of 2014 she learned about crowdfunding and quickly realized the leading platforms weren’t offering what independent filmmakers needed.

Unlike U.S.-based crowdfunding platforms such as Indiegogo and Kickstarter, where supporters are donating money, DreameGGs solicits funds as investments in projects that the company hopes will make money and offer the investors a return.

“Most of them will be paid $5,000-10,000,” Tong said of projects seeking donations via Indiegogo and Kickstarter, platforms which typically draw amounts Tong feels “it is not possible to make a decent movie” with.

“On the other side, I see the studio movies burning a lot of money,” Tong said, describing her motivation to start DreameGG and identifying the role she sees her site playing. “I just feel there was a gap there: [what was needed was] someone smaller than a studio project, but bigger than an Indiegogo campaign.”

Tong said she saw an insatiable appetite among Chinese investors to find new investment opportunities more promising than in the flagging areas of real estate and stocks.

“None of them have been performing well and they’ve been declining. [Chinese] are looking for a new direction for their investments. At the same time, the film industry is doing crazily well and people are excited hearing about those huge box office numbers,” Tong said.

Tong hopes to link these Chinese investors to Hollywood’s “more sophisticated” moviemaking market.

“A lot of people, especially those people who were born [after] 1980 and -90, have grown up with Hollywood movies. So there is a huge fan base there,” she said.

Big players also have been experimenting with crowdfunding. After it acquired parent Alibaba’s Yulebao crowdfunding platform, Alibaba Pictures started to try to use it to fund entertainment-related projects.

But unlike Yulebao, DreameGGs will be a transnational entertainment crowdfunding platform, a prospect that raises a number of regulatory issues, especially as China seeks to clamp down on money leaving the country.

Like many online companies in China operating on shifting regulatory grounds, DreameGGs has had to invent an intricate mechanism for getting money from investors into the hands of budding American filmmakers.

Investors don’t actually buy equity in the individual movie projects, Tong says. Instead, DreameGGs investors are buying equity in Shanghai Jumeng, a subsidiary of DreameGGs based in the Shanghai Free Trade Zone.

“We let people own a small share of Jumeng Company and then Jumeng essentially makes the investment in the production companies,” Tong said.

The unorthodox way of raising capital for film projects has not developed without controversy.

Analysts suspect the use of a peer-to-peer (P2P) lending firm to raise Ip Man 3’s reported $30 million budget may have incentivized the film’s distributor to cook the box office stats by bulk-buying tickets to its own film in collusion with hundreds of cinemas.

The DreameGGs name derives from the process Tong and her team have developed to take movies from a pitch through to completion.

In the “incubating stage” projects are encouraged to grow their fan base and not presented to investors until they are deemed ready to hatch.

DreameGGs then analyses the social media output of the film projects they list to gauge what sort of buzz they are generating and how much of a fan base they can grow.

“Ideally, we find those projects with enough social media buzz, which gives an indication of what its profits will be so that the investors can actually make some money in the end,” Tong said.

—Additional reporting Skye Tan, Chloe Chow.