4-14-06
Getting Money
Ah, funding. The bugaboo that plagues every theatre’s dream of owning/operating their own space. Allocating enough capital to fund a theatre can foil the best wishes of any company. There are a few options for any theatre looking to embark on this kind of capital campaign. All of the following is a log of what we did, working on a small level as we did. As a personal history, I hope it will be of some help.
We faced a number of challenges as a new theatre in starting a new space. In 2003, I had no donor base and, in fact, no board of directors. We were a non-producing theatre-to-be, looking to build a $500,000 space. Or so I thought at the time. I can honestly say that there was no way to jump start an organization the size I had in mind using solely my personal contacts. I had run a theatre in the early ’90s and had a number of good personal and business prospects to start building a board of directors, but no one with the financial resources to seed a capital campaign. I was in excellent shape to start a theatre, but poor condition to put us in a space.
Helene Hanff once wrote her only law of the theatre: “Whatever happens, it’s unexpected.” And like so much in the arts, the opportunity could not have been controlled or predicted. Sadly for us, we lost my mother-in-law in 2001 to breast cancer. Her estate included a foundation dedicated to not-for-profits. As the new executors, my wife and I used the majority of the money to fund a chair in cancer research with the University of Virginia. Using the remainder, we seeded the theatre project with $300,000.
Now, does every theatre need that kind of starter money? Of course not. A storefront conversion might only be budgeted at $50,000. But I found some seed money substantially valuable in approaching other funders. Money attracts money.
So who are your angels? Your large donors? Your best funding resources for kick starting your capital campaign? Make sure you have some sense of how deep your funding sources are and what their commitment to your project will be. Do this before you embark on a public capital campaign. You’ll need to know what level of support you can expect from them. Go to them with your plan, including all the projected costs. Sketches, architectural drafts, spreadsheets, the works. Plan their contribution with them hand in hand. The difference between having 0 percent at the start of your campaign and 15-20 percent is enormous. Also, you will be examining spaces and trying to determine the limits of your build-out ability. Knowing you have secured the support of your key donors is an invaluable predictor for the level of support you might expect from your second tier donors. Were your angels excited? Did they buy into your vision? Did the level of commitment match your expectations?
The other advantage to securing some money up front is purely for business reasons. We set up an account for the new space development, separate from our production accounts. Just the existence of cash in hand makes dozens of choices easier. Need to put down a deposit on your space? Done. Design payments? Done. I’ve seen 10 or 12 things over the last year that have required actual cash. Having some cash on hand significantly eased a series of business decisions. At the very least, we opened our accounts with a fair influx of cash, which amount has not changed. Now, several years later, we are a steady and reliable bank customer who has maintained a relatively high balance. Is that useful? It will be this month, two years and three months after opening the account.
Next, I needed to launch a capital campaign. Heck, I needed to organize an entire not-for-profit. Based on a number of personal and professional contacts I’d made over the previous 10 years, I organized a series of dinner parties at my house for potential donors/board members where I could present my idea for the space and the theatre that would occupy it.
I felt a committed board would be absolutely essential. We were embarking on a large scale financial project, and I needed a core group of board members who could help support it. The first requirement for a board member of my group was therefore financial. Of course I wanted people who would be around for years as we built the organization, people who could be excited about growing our arts organization from a scheme to a reality. People who loved the arts, in other words. But in 2003, I needed cash even more. At that point, the project was budgeted at $500,000 based on the spaces we were looking at. That left me with a current shortfall of approximately $220,000. I knew I would be able to get some level of commitment from the landlord, but I doubted I could get 40 percent funded as part of the lease agreement.
So, well-off arts lovers it was. I was fortunate in that my board committed to raising $25,000 the first year and $40,000 for two years after that. In 2004, we even came close: $23,450 largely due to board member personal contributions and a few individual donors. The second year, my plan fell apart, largely due to delays in building the space. Faced with an uncertain start date, both board and my small donor base were reluctant to donate money toward a largely intangible project. In an effort to conserve cash for what was rapidly becoming a larger-than-imagined project, we only produced a single show in 2005 instead of a season, which in retrospect was a mistake. The money we saved by not producing was not matched by the potential money we could have raised from individuals presented with a season and a vision. I think the not-producing malaise spread to the board as well. With only a Christmas show and no defined property, their attention and commitment was also tried. We lost two board members in 2005 and personal contributions were almost non-existent. Total contributions for the year amounted to $13,500, $10,000 of which was solicited by myself. About 25 percent of our target goal. And a reduced board.
So this year, we produced. We’re producing a two show season before we move into our space: Santaland Diaries returns [at Christmas] and we are currently doing a new musical, Two for the Show. I hope for a zero balance at the end of the year from ticket sales to production costs. If they both go well. Obviously, we can’t produce our way to a new space. But we can show potential donors the work we do and we can lay the groundwork for subsequent solicitation for our mission.
But much of this groundwork will rely on the board’s ability to fund raise on their own. My immediate circle of donor candidates is good for maybe another $10-$15K before I need to show them something. We’ve just added a new board member and are actively reaching out, so I have high hopes.
Now, your theatre may well have relationships with established foundations and grant programs, a number of whom look with kindness at infrastructure projects. We were unable to pursue those traditional avenues as we were simply too young a group to show we had the institutional stability to maintain a physical plant or the history with the funder that would allow us to go to them with a special funding request.
So for us, it comes down to people. Individuals. Donations, $100, $400, $1000 at a time. Our last opening night benefit netted about $5,000. Our fall benefit will target $10,000. But, our plans have expanded. If all goes well this year, we’ll be looking at a shortfall of $500,000. What to do?
As I’ve mentioned before, your landlord is a critical partner in determining the cost of the build-out (if you are renting). We chose to rent because I had either a) enough money to put a down payment on a building, or b) build a theatre. Not both. Fortunately, our landlord recognizes the scope of the task and we’ve worked out an agreement that will require him to invest $250,000 in the property. This isn’t actually a bad investment from his perspective given the size of the build-out, and he stands to break even in about six years. As a result, we agreed to an initial lease term of eight years, with two year renewals for the next 16 years. He gets a usable commercial space where he was almost going to put a parking lot. Plus he is delighted at the prospect of contributing to the arts and community in Chicago by giving us a shot.
So God bless him, and we’re now shy only $250,000. Er, yipee?
So, here’s the remainder of my scheme as it stands today: we are currently applying for a loan to make up a portion of the difference. The space provides a reasonable business plan that I have drawn up—a potentially self-sustaining enterprise (as long as I didn’t insist on doing shows in it :) ). I’m looking for a line of credit for approximately $150,000 to take us through the end of 2007. I have reasonable assurances that we are perfectly eligible. Consider the fact that we have been a steady bank customer with over $250,000 in assets every year for two and a half years. That seed money pays off its dividend just by establishing a strong credit history.
In 2008, I have guarantees of funding from various donors to the tune of $100,000. That, plus the Board’s continuing contribution and a not-too-disastrous-we-hope season will hopefully move us into the black, plus a slight debt load. The interest on the debt is being paid by rental operations. The balance…? Who knows? Anyone with clever ideas, feel free to e-mail them along! In any event, there’s the picture.
In many ways our journey to owning a space is idiosyncratic, but so are all of them. The circumstances of funding have everything to do with your board, your audience and your personal resources. Each theatre’s journey is individual and harrowing. Enjoy!