How to Invest in a Broadway Show

We hear a lot about making Broadway accessible. Broadway ticket prices have outpaced inflation over the decades (by a lot) and cheap preview tickets were abandoned years ago, all leading to the impression that Broadway is not accessible for those with average, or below average, incomes. There have at least been attempts to combat that impression in recent years. But something that is still largely seen as an older rich people game is investing in Broadway. However, a bunch of people have been trying to change that in the last decade, with attempts heating up more recently.

Increasing Education and Access

The first issue is that most people don't know how to produce or invest in a Broadway show. Most Broadway producers know other Broadway producers. Most Broadway investors know Broadway producers and invest when they are contacted by those Broadway producers. This automatically limits the pool.

For most people to break through, it takes considerable work. For example, Lamar Richardson, 29, used his connections as an actor and old school industriousness to land his first producing credit, this fall's DEATH OF A SALESMAN. A year ago, he started putting out feelers, emailing producers he either had met or knew by above-the-title name, asking them to consider him for a possible producer credit on specific future productions. Nothing materialized from those initial reach outs. However, when he congratulated COMPANY producer Chris Harper on his Best Revival Tony Award, Richardson received an email back, saying that DEATH OF A SALESMAN had an opening for a co-producer. Richardson then had two weeks to raise the required $250,000 in units of a minimum of $25,000 each.

"I literally hit the ground running and reached out to every single person I could think of in my personal network who would qualify and be interested," Richardson, 29, said. "I pulled together all the history about the play itself. I pulled together the reviews of the London production. I highlighted that it was a reimagining told by an all-black cast. I presented it as being about what you could look at in black and white-this is as tried and true as you can get on Broadway. You can look at Broadway World and see the grosses of the past productions. You can see the capacity and believe it."

With that pitch, he managed to get to $250,000 divided among three investors. All of them are first time investors and all are people of color, facts Richardson is particularly proud of.

And Richardson certainly isn't the only one trying to widen the investor base. In a time when investments in theater are becoming increasingly difficult to secure, many in the industry are hoping to attract new blood. The issue has been how to do that. Producer Ken Davenport has written books and multiple blog posts to demystify the process and, through this, has assembled a large list of potential investors he can email when new investment opportunities arise. Steven Baruch, Richard Frankel, Marc Routh and Thomas Viertel--the team behind 54 Below and countless Broadway shows--likewise have a list. That team uses the 54 Below email list to solicit new investors.

According to Baruch, the 54 Below email address list is over 100,000, which allows him to reach enough "small investors" to finance chunks of a show. Though "small" in his case is minimum $15,000 to $25,000. Baruch explained that in the 1980s, he and Tom Viertel began investing in shows by calling their friends and getting $10,000 each. As shows got more expensive, they needed to go beyond their friends, and the 54 Below email address allows them that opportunity. When the group is fundraising, it sends out an email to all subscribers asking if they would be interested in investing.

This is a sample from a recent general solicitation that went out about investments for the Broadway transfer of the BACK TO THE FUTURE musical:

The purpose of this note is simply to ask if you might like to consider -- in principle -- making an investment in one of our future productions. As far as we know we're the only Broadway producers left who put together major shows with large numbers of relatively small investors (minimum $15,000 to $25,000, depending on the show) -- and we think (actually we know) it's fair to say that most of our investors have had a great deal of fun, and have done quite well financially in the bargain.

(Baruch stated verbally that the last clause was not meant to say that most shows are financial hits, but rather it is based on the particular investments chosen by his investors.) According to Baruch, approximately 1600 people have responded through the years. They get a follow-up letter of 2-3 pages about the specific project. In the case of BACK TO THE FUTURE, that letter is soliciting $25,000 minimum (which Baruch says is the group's highest solicitation number ever) from investors. Investors who want to sign on following that letter receive all the relevant legal paperwork, including general budget and expected recoupment schedules.

"It's very low key -- if you have no interest after receiving the letter, you don't receive anything else," Baruch said. "We come at you with a specific show and you decide whether you think that is a good show. And, if you pass, you wait for the next one to come along. That's it."

Investment clubs and numerous different types of investment funds are actively soliciting people for more wide-ranging projects. One such investment club is the appropriately named The Broadway Investor's Club, which was launched by attorney Jason Turchin a couple of months ago. Turchin, who was inspired to form the club by his own experiences as an investor, has been paying for ads on social media to get the word out about the club. He said, in the last couple of months, hundreds of people have reached out.

He explained: "We wondered, what if there was a point of access? What if it wasn't a super-secret world where only an exclusive few can get involved to support the arts or be part of that next big show? If we can give people a point of access, we can give them opportunities."

Turchin stresses that the club has no membership fees and there is no obligation once you sign up. Rather, it functions more like a list, with some differences. One difference is that ideally The Broadway Investor's Club itself would serve as a co-producer on projects (with the added perks that includes, including such obviously cool things like an additional share of the profit and your name on a Tony Award if the show wins) but it doesn't necessarily need to serve in that capacity. Most lists are run by the producers themselves. So far The Broadway Investor's Club have signed on to co-produce the touring country musical MAY WE ALL and the play WHEN PLAYWRIGHTS KILL. But if, let's say, only one investor wants to invest in an opportunity the club presents, that investor can do it, even if The Broadway Investor's Club will have no involvement whatsoever moving forward.

"As we get opportunities, we send them to our group," Turchin explained. "If you want to invest, or think you might want to, we contact the production company. We give you access whether we get anything from it or not."

Turchin also does webinars and additional education for the members. For example, he might distribute a pitch deck for a certain show, and explain things in it to club members. He stated he has heard not only from investors, but from creatives and producers about how to get his group involved in certain shows.

Turchin and others want Broadway to learn from the engagement opportunities other fields are offering.

"Over the years, the traditional business world has changed," said Davenport. "You have Robinhood and NFTs, you have more involvement. So we're trying to work in a new model. I'm looking into starting a Young Investors Club designed around how to get people under 30 engaged and keep them engaged."

Another way of getting into Broadway investments which has become more accessible in recent years is investing in a related fund. These funds basically pool money and invest from the pool -- fund leaders generally try to raise as much money as possible before investing so that the money is adequately spread out between productions. Some of these funds give you a choice in investment and some of them are blind. With a blind fund it is basically like sending your money to a financial advisor and allowing them to invest it as they see fit. And the concept is nothing new -- in 1997, for example, a partnership and related fund was formed that had first look at Broadway transfers of London plays directed by Duncan Weldon. This was also a blind fund; you knew that the shows would be directed by Weldon, but you had to trust that the partnership would pick Weldon winners.

Obviously, through the years, these investment funds have been able to gain more traction and collect more investors through the internet. Now you can often Google funds and ask about investments. For example, the Broadway Strategic Return Fund bills itself as "The only professionally managed, data-driven fund focused on theatrical finance." If you saw the Broadway Strategic Return Fund (credited as a producer on HADESTOWN, THE INHERITANCE and more) above-the-title you can easily search for it, reach out to its founders and gain all relevant information. Same with various funds that are committed to certain social causes, so-called "impact funds."

Blind funds have tended to be less popular than others -- because of the personal nature of investing in art -- but all have had some success. And funds have tended to have a different, more encompassing, pitch to investors because of their very nature.

Reducing the Entrance Point

Education is one thing. But, of course, another issue is that investing in Broadway is risky and expensive. And -- although there are many legal vehicles to invest in Broadway --traditionally, you needed to be an "accredited investor" to take advantage of any of them. While the definition of that has changed throughout the years, basically, you need to (1) fall into a professional category that qualifies you (such as if you are an investment advisor); or (2) meet certain financial criteria (net worth of over $1 million or income over $200,000 individually or $300,000 with partner). This means that while an unaccredited investor can drop 50,000 in bitcoin overnight, they cannot typically invest that same money in a Broadway show.

Additionally, usually an investment unit for a Broadway show comes in at minimum $25,000, so we're not talking about small bills here. Turchin said, through his club, if someone wanted to invest less, he would try to coordinate with other investors a pooling of money and establishment of a Special Purpose Vehicle to make the investment, but, the investment itself would have to be the minimum unit. Davenport also noted he has been "flexible with minimums" when an individual is important to the process. And occasionally are also some half unit opportunities. However, the standard is a unit investment.

Many of the funds in fact require an investment over the typical Broadway unit. For example, the Broadway Women's Fund, an impact investment fund dedicated to promoting the works of women, required $50,000 from investors. It is simply the funds use the money differently - they often thrive on diversification as a risk mitigation strategy. So a $50,000 investment could maybe get you into 5 or even 10 shows, but you'd still need to have the $50,000.

One noteworthy exception is the 2011 revival of GODSPELL. For that revival, producer Ken Davenport was able to gather small investments from accredited and unaccredited investors by using Regulation A, a regulation that capped investment at $5 million total and required registration (and registration fees) in every state in which he wanted to raise money. In other words, it was extremely complicated and limited, which is why we haven't seen it become a model for other productions.

But, since then, Regulations CF and A+, both broader types of crowdfunding regulations allowing for investment by unaccredited investors, have been enacted. This provides another type of opening into the industry that some producers are working to take advantage of. For example, The Industry Standard Group is a group of eight diverse co-founders aiming to launch the Second Act Theatrical Capital fund this fall. The fund, which will utilize Regulation CF, will allow investments under $1000.

"During the pause, there was a lot more opportunity to look at trying to engage other people from all sort of backgrounds," Rob Laqui, 44, one of founders of The Industry Standard Group, stated. "We saw the same insular investors coming to the table for commercial productions. The initial thought was: 'How we can get more people or communities that weren't necessarily invited to the space to participate in this space?'"

Laqui -- a former puppeteer who also serves as Production Coordinator for NT America and Associate Producer at Octopus Theatricals -- was given a unique opportunity himself right after the pause. He served as "Associate Producer" on IS THIS A ROOM and DANA H. The role, spearheaded by lead producer Matt Ross (himself in his mid-30s), was created to get more diverse voices in the room without any financial raise.

But those are rare. Laqui and his Industry Standard Group cofounders started meeting to discuss how to get people involved more regularly. Through this, a few of them joined together to get a producing credit on the HADESTOWN tour and A STRANGE LOOP. But they wanted something bigger than just them. They knew they wanted to ask for only a comparatively small investment amount, but they also wanted their group to be more than just soliciting investments; they wanted to engage, and invest in, new voices in theater.

"We won't invest in just anything," he said. "There will be sort of an educational component. We will only invest in projects where we work with the production on a programming component that will involve engaging our members. Then, the investment prong, will work like a regular fund."

To be clear, no matter the investment vehicle, the stats on how many shows recoup range from 20-25%. Possibly better than tech startups, but not great. Some shows don't recoup fully but recoup some share of investment. Investors obtain a pro rata share of money for each week that a show's ticket sales are above the show's weekly operating cost. (These operating costs may include management fees to some above-the-title producers.) This money is accrued weekly, but typically distributed quarterly. Investors receive their pro rata share of 100% of net profits until the investors recoup their original investments but, once a show has recouped, the net profits are usually split, with a percentage going to the producers and a percentage to the investors.

So, no matter what you are investing, it often takes a long time to get all your money back, even if it will eventually happen. And because most investors don't have detailed budgets, there is not true transparency into what is going on behind-the-scenes. But Baruch said none of his investors have complained about that particular component.

"It's rare that anybody pursues aggressively the financial aspect of it," Baruch said. "I think everybody understands it's kind of a lark. They trust our track record and experience. Nobody demands financial information over what we send. And I never think that influenced the satisfaction portion."

However, obviously, investors would like to hear that they will hopefully recoup their investments. So the people behind these clubs, lists and funds are also trying to think of ways the model can be improved. A lot of people spoken to mentioned focusing on tours and cast recordings, which are things industry people have spoken about for decades. (MAY WE ALL, which The Broadway Investor's Club is co-producing, is a show that as of now is not coming to Broadway, so it's all touring, music rights and cast recording.) But these folks are also examining new budget models. Right now, none of them have the power alone to change the industry, but as they grow, more attention will need to be paid to the ideas they bring to the table.

"Even though the amount that we're asking people to invest is percentage-wise so much lower than what a traditional investment looks like, we still want to protect that person's investment," Laqui said. "We want to build-in protections. It's not a gamble, it's an investment. There's responsible ways to build out."

His Second Act Theatrical Capital fund will raise in the millions before it starts investing. With it not even accepting investments until this fall, he and his cofounders know they will still have a stretch of time to think of the best ways to invest.

Having new voices in the room unquestionably will bring new ideas, some possibly bad but some good as well.

"We at least have places now where we have so many like-minded forward-thinking people to discuss the Broadway model with," Turchin said.

Of course, there will always be the old-fashioned traditional way of producing -- calling your friends and trying to get them to cough up money. But even that people will do with an eye toward expanding who is making those calls and who is on the other end of the line.

"Through my outreach, I learned that there was a desire to see more representation behind the scenes," Richardson said, echoing others. "With more time to get knowledge on it, people are interested to help fund that. So I know I can help to diversify the overall investor pool on Broadway, especially given that most people I went to school with are under 30 or early thirties, and they have these jobs where they can afford to get into this, if they have the right introduction. It's all about access.