There is a dance studio a few blocks from my home, in the once seedy and now trendy Mission District of San Francisco, where my friend has been taking hip-hop dance lessons for the past couple of years. Or, I should say, there was a dance studio: It's losing its lease because a dot-com is willing to ante up more cash for the space.
This is, of course, an increasingly common story. Despite the stock market turmoil of late, there are still more young millionaires than at any previous point in history, thanks to an economy that has been phenomenally generous to the young and tech savvy. As a result, many of the dancers, painters, filmmakers and sculptors who for decades have given San Francisco and other cities across America their color can no longer afford their rent. It is painfully ironic that America's arts scene is suffering at the hands of a booming economy; you'd think a new economy built by hipsters plugged into their MP3s wouldn't run over the world's bohemians with even greater zeal than the old chauffeur-driven corporate economy.
This irony has not been overlooked. A number of companies emerging online are hoping to match those dot-com dollars with starving artists. The first out of the gate: Idealive, a three-month-old San Francisco start-up that helps artists raise money online and recently closed its first financing of a film. Others, like the sites Reel Capital and PatroNet, are set to launch in upcoming months. It's a thoroughly modern Medici model: a system that turns patronage of the arts into an "investment opportunity," couching charity in terms comforting to MBAs. And although few may truly believe that art is the next hot investment market, there are still some wealthy entrepreneurs willing to fork over part of their newfound fortunes for an improvement in their "artistic" quality of life.
As Kelli Richards, co-founder of the "fund an artist" site PatroNet, puts it, "There's a whole new movement of philanthropy for dot-commers, and you're going to start to see a trend with these dot-com millionaires. After you buy the house and the car, what do you buy next? What do you do with your discretionary income?" Why not give it to a really cool filmmaker or a groovy musician you love?
Already, some young entrepreneurs have proved their willingness to spend money on endeavors that benefit local arts communities. For example, Jamie Zawinski, a former Netscape programmer whose stock-option millions haven't deterred him from his love for alternative culture, recently purchased a downtown club in San Francisco, which he plans to turn into a mecca for local bands and video artists. And there's Brian Behlendorf, the young founder of Apache, who, along with several others, helped fund the movie "Groove," a local production about the rave scene he loves. It's a different mind-set than you might find in a retiring CEO, whose idea of arts spending is likely to be more along the lines of an impressionist piece at a Christie's auction or a hefty donation to the local opera company.
It is the younger, newly wealthy elite that is the target of Idealive, which matches investors with artists through a sophisticated private-offering process. To get an idea of how Idealive works, think of a typical widget-hawking company that wants to raise money: It forms a limited liability company, or LLC, puts together a prospectus with projected risks and potential revenues and sends this around to investors, enticing them to buy a chunk of the company. Replace the widgets with artists, and you get Idealive. Idealive helps filmmakers, musicians and other artists raise funds for specific "projects" by turning them into corporations and helping them build prospectuses.
As Ze'ev Rozov, CEO of Idealive, explains, "We're using the power of the Internet for more niche-related content, and allowing people who care about that content to get involved in the project itself by investing."
One such project comes from Tor Hyams, a veteran jazz-funk musician with a handful of self-produced albums under his belt. He's trying to raise a modest sum to produce his next album. On the Idealive site, you can read about his background, listen to his previous work and peruse his prospectus. Then, if you are an accredited investor -- the Securities and Exchange Commission mandates that to participate in high-risk investments you must be worth more than $1 million, or boast a yearly income of $200,000 or more -- who has registered with the site, you can buy shares in the project. If the album is successful, you'll reap some of the rewards.
Why did Hyams choose this route rather than go to a record label for funding? The record industry, he says, isn't interested in anything with a real artistic sensibility: "They just say, 'We need another Hootie.' It's antithetical to creating art." After years of frustration and disillusionment, he was thrilled to come across Idealive.
"I think Idealive is a way to get around 'the system,' but I also think it's a way to move art forward and not care about 'the system,'" he explains. "I'm just interested in doing my thing, as inarticulate as that sounds. If the deal is right, I will go with any funding source that enables me to do my thing." As a relative unknown, though, his best bet is that someone will hear his clips online and like his music enough to fund it without asking to mess with his "art" -- a tall, if not impossible, order.
So far, Idealive has managed to close one funding, for a feature-length film called "Olive Harvest," by Palestinian filmmaker Hanna Elias. The film -- a movie about two Palestinian brothers and the woman they both love -- managed to raise $120,000 from two high-profile Silicon Valley investors. One of those investors was Kamran Elahian, an Iranian-born businessman who has founded nine high-tech firms (including Cirrus Logic, NeoMagic, Planetweb and Cahoots.com) and venture capital firm Global Catalyst Partners. Elahian has done investment and charity work with Palestinians and was thrilled to have an opportunity to participate in a film about a country he loves.
"The portions of the movie that I've seen bring tears to my eyes," testifies Elahian. "It's a positive message about developing understanding of life in Palestine and Israel, and portraying the Palestinian culture the way it really is rather than the way we see it on CNN."
For Elias, Idealive offers a chance to make his film without having to pander to the needs of a movie studio. "You know, [the film industry] is very fishy -- you have to be appealing to the main market, for this and that," blurts Elias, in enthusiastic if erratic English. "In my case, I just have to be appealing to my subconscious and do it through the exhibition of my own art."
Idealive is, of course, built around the idea of investment: The gamble that Elahian is ostensibly making is that the film will be a financial success. He admits that he's hoping the movie will make money -- because he plans to donate his proceeds to a Palestinian charity -- but he's not going to be upset if he loses his money. "Sometimes you win and sometimes you lose," he says.
The odds, however, are probably slim that "Olive Harvest" will become a box-office blockbuster. The fact that Elias doesn't feel the need to appeal to the "main market" would probably dissuade an investor truly looking to pad a retirement portfolio. It's not impossible, but independent films and foreign films -- even those with generous funding -- rarely get the distribution and marketing support required to make them a success. Underdog hits like "The Blair Witch Project" (the example everyone points to when talking about indie film profits) are rare.
But despite all the talk of prospectuses and shares and potential returns, Idealive isn't really targeting people trying to make a fortune on investments in artists, which would be even riskier than investments in Internet IPOs. What Idealive can offer, which the latest greatest stock offering can't, is passion: projects that the ranks of dot-com millionaires feel a personal interest in.
As CEO Rozov admits, "Idealive is not about investing; it's about getting involved in something you care about." Even if "Olive Harvest" doesn't become a blockbuster, Elahian will still have helped produce a film he believes in.
A good model can be found in "Groove," an independent movie about raves that recently hit the theaters and is proving a success. Director Greg Harrison, a San Francisco resident, wanted to make a movie that would be true to the local dance scene; although movie studios had expressed interest in his film, he says they wanted him to compromise the script by inserting drug overdoses and gang warfare.
Instead, Harrison turned to a local network of affluent technophiles -- computer geeks and participants in the rave scene who had made a mint in the dot-com economy. He formed an LLC and raised enough money to make his film and take it to Sundance, where it was bought by Sony Classics. His investors, who participated in the film project for the love of the subject rather than the promise of profits, know they're lucky to have made their money back and more.
"In the Bay Area there's a new kind of millionaire -- people under 30 who have enough money to do investing," says Harrison. "It's an exciting new group of investors -- not your traditional guy in a suit who is stingy and conservative. They are young enough to take risks and need to find creative things to do with their money."
It's also a fair bet that there are a good number of wealthy CEOs or seasoned programmers who have always secretly admired the more colorful world of filmmaking or fine art, and would love to get involved in some way. This is the other hook of Idealive: Even if you can't wield a paintbrush yourself, you might be able to develop a "partnership" with someone who can. Consider it not charity but vicarious artistry.
This scenario may sound unlikely, but think of the historical precedents of benefactors and patronage. During the Renaissance, the Medici family, which made its money in banking and commerce, supported artists like Botticelli, Angelico and Michaelangelo, and turned its hometown of Florence into the cultural capital of the world. Or look at Yaddo, the 80-year-old artists colony endowed by turn-of-the-century aristocrats who wanted to pay the room and board of poets, musicians, artists and authors while they created masterpieces -- just because they could. And of course the Carnegies, Astors and Rockefellers have supported the arts for more than a century with their industrial fortunes.
Idealive simply brings the notion to the digital age, making it even easier to participate -- and bringing the artists and patrons even closer together, in a one-on-one relationship. Elahian explains the appeal: "It's a wonderful process, getting to see the artists and actors, the sound people and video people. The director himself is a fascinating person. It's a new world out there, and getting to know them is an interesting hobby, completely different from the world I live in."
There are other companies, too, that are puzzling through the relationship among artists, fans and funding -- hoping to bypass the mercenary middlemen that have long controlled both financing and distribution of the arts. In particular, the rise of Napster has brought these issues to the fore and made it clear that record labels aren't taking care of their artists. All across the Net, creative minds are discussing new models that might help artists raise money directly from fans.
PatroNet, which was founded by rocker Todd Rundgren and his partner, Kelli Richards, in 1998, has been developing a model in which fans would "underwrite" their favorite artists -- paying sums directly through the Internet -- so that the musicians wouldn't be forced to sign with a record label for an advance. Much like BowieNet, David Bowie's subscription-only music ISP, PatroNet envisions fans paying a small fee in exchange for access to limited-edition music and content. PatroNet has had problems getting off the ground, but was sold to Danny Goldberg of Artemis Records earlier this year and is set to launch in upcoming weeks. Although the model probably won't work for obscure garage bands from Modesto, Calif., it could pay for established artists with big fan clubs.
"Traditionally both labels and studios controlled all the content; with PatroNet and Idealive, that's not the case anymore," says Richards. She sees the two companies as complementary -- one targeting big investors, the other targeting fans of already-established artists -- and hopes that they will both help artists avoid selling their souls to record labels and movie studios.
Also on the horizon are companies like UMogul (which, although rumored by others in the industry to be developing a model similar to Idealive's, declined to speak about its business) and Reel Capital.
Reel Capital (which evolved out of a site called MovieShares.com) plans to let visitors to its new Web site buy shares in independent films in development. Like Idealive, Reel Capital wants to turn filmmakers into LLCs and raise up to $5 million per film (a number set by the SEC as the maximum amount you can raise without having to file an S-1). In hopes of guaranteeing a better return on those investments, Reel Capital also plans to invest in the distribution of the films.
The optimist in me would like to believe that the future of the arts will be revolutionized by the creation of direct partnerships between moneyed fans and starving artists. But just how many of these generous-hearted and artistic-minded individuals are there? The dot-com industry may offer the most ripe pickings, but how far can the goodwill of this population stretch?
Undoubtedly there are fans and investors out there who will happily participate in these programs -- already, the investment portal NVST.com, where established investors troll for new opportunities, has partnered with Idealive and is encouraging its members to participate in the site's offerings. But the concepts are still unproven and humans can be stingy, so I don't think we'll see independent artists backed by young millionaires overturning the established entertainment industries quite yet.
"For anyone to claim that they are going to change Hollywood or revolutionize the way Hollywood operates is a tall statement," says Clint Kisker, interim COO of Reel Capital. He does, however, believe that "our model will help bring the public into filmmaking, and eliminate the disconnect that goes on between people who produce the films and people who consume the films."
And that is a good place to start.