Vertical Investment

Objective

The Collective will develop a resilient, revenue-generating investment portfolio across the motion picture value chain by acquiring strategic stakes in essential companies, services, and infrastructure. Rather than operating these businesses directly, The Collective will leverage its purchasing power, production pipeline, and talent network to create long-term competitive advantages for its portfolio companies.

Each opportunity will be assessed through a structured framework to determine whether it is best suited for this minority investment strategy; preserving operational independence while influencing key policies, or full acquisition and integration into the JUYAA Media Group, where tighter alignment with The Collective’s mission and operations is strategically advantageous.

Approach:

  • Target 15–40% minority stakes (case‑by‑case), with information rights, board observer/seat, and reserved matters to influence high‑level policy and key operations when necessary.
  • Blend cash equity with structured minority instruments (e.g., preferred equity, revenue‑share notes, equipment SPVs) to match sector risk.
  • Pursue synergies: preferred vendor programs, cross‑portfolio contracts, shared services, and demand aggregation from co‑op projects and partners.

    Why minority (not control):

  • Keeps founders/operators motivated and accountable.
  • Reduces operational overhead for the co‑op.
  • Lowers regulatory/antitrust risk and capital intensity while preserving influence.

    Target Verticals & Sub‑Sectors

    A. Development & IP Services

  • Script coverage & development funds, writers’ rooms, story/IP scouting platforms.
  • Legal/clearance firms, completion bond brokers.

    B. Production Services & Infrastructure

  • Sound stages, backlots, production hubs, power/generators, grid tie‑ins.
  • Equipment rental (camera, grip/lighting, drone, specialty rigs).
  • Logistics: unit moves, transport, storage, set construction, prop/wardrobe houses.
  • Insurance & payroll providers specialized for film/TV.
  • Catering/craft services at scale with sustainability standards.

    C. Post‑Production & Finishing

  • Picture (offline/online editing), VFX, color, DI, dailies, QC.
  • Sound (ADR, Foley, mix stages, music supervision).
  • Localization: dubbing/subtitling, accessibility, M&E tracks.
  • Archiving & MAM/DAM solutions.

    E. Technology & Workflow

  • Production management SaaS (scheduling, budgeting), secure collaboration & review.
  • Remote production, virtual production (LED volumes, real‑time engines).
  • AI‑assisted localization, QC, compliance checks (human‑in‑the‑loop).
  • Data/analytics for audience insights, pricing, and windowing optimization.

Governance & Influence

Instruments to retain influence:

  • Board seat or observer rights (depending on stake size).
  • Reserved Matters (veto/consent required) limited to:
    • Changes to cap table or senior debt levels beyond thresholds
    • M&A, major asset sales, related‑party transactions
    • Annual budget approval, capital expenditure above X
    • Key leadership changes (CEO/CFO/Head of Operations)
    • Changes to pricing to co‑op under Preferred Supplier Agreements (PSAs)
  • Information Rights: monthly/quarterly KPIs, audited annuals, budget vs actual.
  • KPI‑Linked Covenants: e.g., utilization, on‑time delivery, client NPS, sustainability targets.

    Alignment Tools:

  • Preferred Supplier / Most‑Favored Pricing for co‑op members & partners.
  • Volume Commitments from the co‑op pipeline (non‑binding targets, rolling reviews).
  • Cross‑Portfolio SLAs and escalation paths (service credits if breached).
  • Ethical & Sustainability Standards appended to shareholder agreements.

Value‑Creation Playbook

Commercial Synergies

  • Aggregate co‑op and partner demand to negotiate lower unit costs and lock priority access (e.g., stages, high‑demand lenses, finishing suites).
  • Cross‑sell services across the portfolio; bundle offers (e.g., production + post + localization packages).
  • Launch Preferred Vendor Network branding to attract third‑party clients.

    Operational Uplift

  • Shared playbooks for scheduling, pricing tiers, pipeline management, and client onboarding.
  • Centralize procurement, insurance, and compliance where feasible.
  • Implement data dashboards: utilization rates, set‑day throughput, turn‑time, rework rates.

    Technology Enablement

  • Standardize on secure collaboration and review systems across companies.
  • Pilot AI‑assisted localization/QC with human oversight to expand margins.

    Talent & Training

  • Create an academy co‑developed with portfolio firms; guarantee interview pathways.
  • Offer stackable credentials (grip, DIT, color assistant, conform, mix tech).
  • Diversity & inclusion goals tied to portfolio hiring KPIs.

    Sustainability

  • Green production protocols (power plans, waste, transport).
  • Measure CO₂ per shoot day; incentivize reductions with fee rebates or shared savings.

Deal Sourcing & Screening

Sourcing Channels

  • Industry referrals, associations/unions, vendors, festivals/markets, accelerators.
  • Outbound mapping of regional production ecosystems (gaps in stages, rental, post).
  • Corporate carve‑outs where founders want liquidity but ongoing leadership.

    Screening Criteria (Scorecard)

  • Strategic Fit (0–5): Relevance to portfolio synergies & member needs.
  • Market Position (0–5): Niche leadership, switching costs, defensibility.
  • Unit Economics (0–5): Gross margin, utilization, WIP turns, pricing power.
  • Operational Resilience (0–5): Redundancy, SLAs, QA/QC maturity.
  • Governance Readiness (0–5): Reporting, controls, willingness to adopt PSAs.
  • Impact (0–5): Jobs, skills, local spend, sustainability.

    Diligence Focus by Vertical

  • Stages/Infrastructure: occupancy, bookings backlog, power/cooling, permits, expansion capacity, landlord terms.
  • Rental: asset age, maintenance, insurance loss history, utilization per category, OEM/vendor relationships.
  • Post/VFX: throughput, pipeline tooling, staff mix (perm vs freelance), QC failure rate, delivery acceptance metrics.
  • Distribution/Marketing: slate performance, platform access, contract terms (MGs, rev shares), receivables aging.
  • Tech/SaaS: ARR/MRR, churn, NRR, roadmap, security posture, integrations.

Capital Stack & Example Structures

Minority Preferred Equity
1× non‑participating preference; 6–8% dividend (pay‑if‑able); standard minority protections. Revenue‑Share Notes
3–6% top‑line rev share until 1.5–2.0× cap; helpful for rental/post with stable bookings. Equipment SPVs (Sale‑Leaseback)
Collective SPV buys gear; portfolio company leases; co‑op earns lease yield + residual value. Convertible Notes (Tech)
Discount + cap; converts on institutional round; early influence via advisory agreements. Project‑Linked Sidecars
For distribution/marketing firms, sidecars co‑fund P&A or minimum guarantees with recoupment priority.

Risk Management

Cycle Risk
diversify by vertical and client mix; avoid over‑exposure to single streamer/broadcaster. Key‑Person Risk
require key‑person insurance and vesting/retention packages. Currency & Jurisdiction
hedge large FX exposures; standardize contracts; use local counsel. Technology Obsolescence
rolling capex plans; vendor buy‑back agreements; secondary markets. Labor/Union Dynamics
maintain compliance; budget for negotiated increases; contingency plans. Counterparty Risk
strict receivables management; lockbox arrangements for distributors where possible.

Portfolio KPIs & Impact Metrics

Financial/Operational

EBITDA margin, FCF conversion, utilization rates (stages, suites, gear), on‑time delivery %, rework %, average day rate, AR days. Strategic/Commercial
Cross‑sell penetration across portfolio, share of co‑op projects serviced, PSA savings captured. Workforce/Impact
Jobs created, apprentice hours, certifications earned, local vendor spend %, workforce diversity, CO₂ per production day. Governance/Reporting
Quarterly KPI pack; annual audited financials; capex plan vs. outcomes; risk register.

Exit & Liquidity Pathways

  • Issuer Buyback at pre‑agreed valuation methods.
  • Secondary Sales to strategic buyers or continuation vehicle.
  • Syndicated Sell‑Down as companies mature; retain commercial agreements post‑exit.
  • Dividend Recaps in cash‑generative service companies (subject to prudent leverage).