TGCI 22: Investing in Broadway Shows. Really? What does that mean?

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Episode 22 – Investing in Broadway Shows? Really? What does that mean?

Show #22 - Matt Picheny & Erica Schwartz

Summary

In this episode, Pancham interviews Matthew Picheny and Erica Lynn Schwartz. Matthew and Erica share how you can invest and earn handsome returns by investing in Broadway shows. 

This show starts out with our guests, Matthew and Erica sharing their backgrounds. Matthew has an investing background while Erica comes from theatre. Our listeners are in for a treat as Erica, next explains how the Broadway show business functions.

What is the typical cost of producing a Broadway show? How can you invest in a Broadway show? Can you earn assured returns by investing in Broadway shows? Matthew and Erica reveal their investment philosophy and share how you can multiply your investment manifold by investing in this little-known Main Street vehicle. 

Tune in for some very interesting insights!

PanchamHeadshotTGCI
Pancham Gupta
TGCI 22 - Matt_Picheny_Full
Matthew Picheny
TGCI 22 - E_Schwartz_Headshot (1)
Erica Lynn Schwartz
Show #22 - Matt Picheny & Erica Schwartz

Timestamped Shownotes:

  • 01:13 – Pancham welcomes Matthew and Erica to the show
  • 01:43– Erica shares how she started off in the theatrical industry
  • 05:50 – What are the two main categories of Broadway shows? And, what is the typical cost of producing a Broadway show?
  • 07:09 – Erica explains the difference between capitalization budget and operating budget
  • 09:13 – Matthew shares the capital raising process for a Broadway show
  • 09:58 – What is the role of a general partner or lead producer in a Broadway show?
  • 12:45 – How do risk and returns for a Broadway show compare to a typical investment?
  • 13:31 – Matthew explains his three-pronged approach for making an investment in a Broadway show
  • 14:02 – Understanding the capital raising process for a Broadway show
  • 14:23 – Why did Matthew and Eric decide to invest in Moulin Rouge?
  • 19:43 – When does a Broadway show actually start making a profit? And, when is the profit actually distributed to investors?
  • 21:23 – What is the profit sharing arrangement for a Broadway show?
  • 22:44 – On a hit Broadway show, how quickly are distributions made?
  • 23:08 – What is a recoupment schedule?
  • 24:00 – What is the benefit of investing in an originating show? Matthew explains in simple terms
  • 25:46 – Typically, what kind of returns can you expect to earn from a Broadway show?
  • 29:42 – Can you expect to earn stable returns by investing in Broadway shows?
  • 30:47 – Should you invest in multiple shows to spread out your risk?
  • 33:55 – Taking the Leap
  • 34:08 – When was the first time you invested outside of the Wall Street?
  • 35:10 – What fears had to overcome when you made your first investment property?
  • 36:20 – Can you share one investment that did not go as expected?
  • 38:20 – What is one piece of advice that you should give to people thinking of investing in the Main Street?
  • 40:59 – Erica shares her contact information
  • 41:23 – Want to learn how the rich earn handsome returns? Check out Gold Collar Investor Show Number 5
  • 42:14 – Got questions? Get in touch with Pancham

3 Key Points:

  1. How to invest in a Broadway show
  2. What sort of returns can you earn by investing in a Broadway show?
  3. How to mitigate risk and earn great returns by financing Broadway shows

Resources:

Get in Touch:

Read Full Transcript

Welcome to the Gold Collar Investor podcast with your host, Pancham Gupta. This podcast is dedicated to helping the high paid professionals to break out of the Wall Street investments and create multiple income streams.

Here’s your host, Pancham Gupta.

Pancham: I have worked in New York City for more than a decade. New York City is famous for many things. One such thing is the Broadway shows. Or people who do not know, Broadway shows are the live shows. I come across Broadway shows advertisements all the time. They are all over the place. Subways, billboards, buses, you name it. I have been to a few of them over my lifetime and really enjoyed them. If you have never been to one, I will highly recommend going at least once. Anyway, all these years being around NYC, I would have never ever thought that you could invest in one of these things? They can be incredibly lucrative if you invest in the right one. I did not know anything about investing in Broadway shows until I got in touch with Matt. Matt and his wife, Erica, who is an expert in this field are our guests on my show today, Matt and Erica, welcome to the show.

Matt and Erica: Thank you for having us. 

Pancham: Are you ready to fire up my listeners break out of Wall Street investments? 

Matt and Erica: Oh, yeah. 

Pancham: Great. So before we begin, do you want to give a quick overview of how you both started out in this business? 

Erica: Sure. Sure. I guess I’ll start. So I started in the theatrical industry pretty early on in my life. I started like many people do, thinking that I was going to be a performer and I was in my middle school and high school you know, theatre clubs and performing and lots of shows and I actually started interning for the various regional theaters where I grew up. And my senior year in high school, I actually interned for a Broadway producer for a few months. But at the time, I was very, very focused on I’m going to be an actress, I’m going to be an actress. And it wasn’t until I went to college and met so many other talented actors and started to really think about career life, which I think is common that it’s not until you’re confronted, when you’re in college on your own for the first time and saying, Wait a minute, what am I actually going to do that’s going to pay my bills and have health insurance and things of that nature? And I was speaking to my professors and they said, you know, you really talk about shows more than just the actor’s role in the show. He was actually my acting coach at the time. And so he said, “You know, a lot of professors here work in professional theatre, and if you want to keep doing that, I think you should work on the other side of theatre”. Because you seem to really have an interest and you talk about ticket sales and you talk about marketing. And he said, most people who are actors don’t talk about those kinds of things. So I was very fortunate. And I started working in professional theater in downtown Chicago. And I really never looked back. My actual investing in shows and raising money for shows really started when I moved back to New York in my early 20s. And I was working for a great producer and general manager. In fact, they were the general managers of Wicked. So I started handling a lot of the investor relations type things for that office, and I oversaw the distributions, and I really got an understanding of how really the cash flow went through that business because each show is its own LLC or LP, whatever entity is chosen to be formed. 

Pancham: Right, right. So before we got into Wicked, you were also involved as part of other shows when you were in Chicago, like how you got into that particular niche from acting. 

Erica: Yeah, I think it was just I had a real passion for the theater. You know there’s a saying in the theater industry that you get bitten by the bug. And really probably from the age of 14-15, I really focused solely on specifically Broadway and live theatrical shows. And so when I was working throughout college…was really kind of how I got that specific understanding of so many shows. It wasn’t until New York that I really got into the producing and investing part of it. 

Pancham: I see. So can you give an example of how much really…a very high level example how much it costs to produce the show? And what are the steps, like you know, from the inception of the idea to actually having the show and the ending the show and taking it off to Broadway. 

Sure. So there’s two major categorical differences in Broadway, which is plays versus musicals. So plays tend to be smaller productions. You know, the big difference, obviously in a musical is that there’s an orchestra and that there are songs. So with a play, you have the actors and the author. And then obviously, you have your full creative team, which is your director, your stage manager, your set designer, your costume designer, with a musical it tends to be bigger. You have the same director, set designer, costume designer, but you’ll also have a music director and a music department. You’ll have composers, you’ll have lyricists. So the team itself, the creative team is bigger on a musical and then you also have all the musicians. So musicals are more expensive in most parts, then a play. The capitalization for plays typically is between, I’d say conservatively between $3million and $6 million. Six being on the very high end of a play. Most plays are on Broadway are capitalized, I’d say much more on average between $2 and $4 million. A musical can range anywhere from I’d say in recent years of smaller musical $8 million. All the way up to I mean, there are some outliers that have been, you know, spider man being the most outrageous example of $75 million or somewhere up there. Crazy. But there are other shows that right now and the typical capitalization for musical is anywhere between I’d say $16 to $28 million, averaging around I’d say on average between $18 and $22 million for a musical. 

Pancham: I see. So this is the whole cost from soup to nuts, everything from the very beginning to buying the storyline to producing it to putting it on theater.

Erica: For the most part.

Matt: And there’s no leverage on that. Right? So that’s the entire…

Erica: Yeah, basically that’s your capitalization budget. There’s two budgets on Broadway. There’s your capitalization budget and your operating budget, your capitalization budget is basically going to be all of your developmental costs, any like you said, any rights. So anything you have to secure if there’s an underlying property. If you are…If there’s existing songs that you want to use, if it’s a film and you’re converting those rights, so any rights that you have to purchase legal fees, your management fees to set up the entity, and then the full cost of the sets and costume, the physical production. That’s all in your capitalization costs. You normally have a couple months of what would be your running once you actually open on Broadway as part of a reserve. If you will, a safety net because it takes time for ticket sales to convert. And then of course, the big swing is your advertising and marketing budget. But you need a significant amount in your capitalization budget to cover all of those upfront fees, you eventually switch over to your operating budget because the biggest thing that is a change that a lot of people have to get their head around when they’re investing in Broadway, is that the shows happen every week. So there’s ongoing expenses every week. 

Pancham: Exactly. Yeah. 

Erica: So you switch from a capitalization budget to your operating budget, once the show opens pretty much on Broadway. And hopefully you have enough money in the bank to keep the show running is obviously the goal. But there are several key indicators that we look at when a show is goes on sale and when it’s leading up to its opening to kind of know and predict the health of the show. 

Pancham: I see. So Matthew mentioned something very, very important that this is not leverage, right? So the total operating budget plus the capitalization budget. Do you have to have all of that upfront before you actually do anything? Like how much you have to raise to actually start going into the show?

Matthew: In general and set up you know, it’s like a syndication. It is a syndication is the way that these are done. Which was kind of how I got involved. I used to have a theater background myself and I do real estate syndications sort of full time but Erica and I got married and we started investing in a lot of shows and started raising capital for these shows together, and based on however the syndication is set up, there’s usually a minimum and a maximum. So you have to hit that minimum before they can move forward with the project. 

Pancham: I see and after that minimum, is it only then you are you know, you go out and sign actors and you know…

Matthew: No, you usually do all that well ahead of time. 

Erica: Yeah. There’s normally a general partner who’s often what’s called the lead producer. And they’re the person who probably has either an idea or is approached by an author or an artist who says, I want to develop this show. 

Pancham: Right?

It can take, you know, a good example, Hamilton was developed over seven years. 

Wow. Yeah.

Matthew: But when you look at it there are other times, and the thing is, that’s interesting for you and your listeners, if anyone’s involved in real estate syndication, there’s a lot of parallels between the two. Right? So this is like the co-sponsor, who’s going out there establishing the relationships with the brokers, taking a look at a deal, maybe it’s off market or whatever. That’s very similar to sort of what Erica is talking about right now, which a lot of times a syndicated my get reimbursed for those costs or have an acquisition fee to cover that. Right. Yeah. 

Erica: So a lot of times the general partner or the lead producer who’s been developing the show over time, you know, they’re taking their own, you know, they’ve probably formed an LLC. And they’re putting out, you know, the legal fees, and they’re covering the developmental costs, but they’re obviously keeping a record. And those costs will eventually get either get rolled into the capitalization and thereby which they’ll get an investment for that equivalent amount, or they’ll get reimbursed for that amount. And then on top of that, they normally get what Matt was saying, either torch bearer points, or additional royalty points, so that when the eventual profit sharing happens, they do get, in a sense the lion’s share of profit because of all of their commitment and all their work, whereas someone who comes in as an investor at the very end, really just wrote a check and obviously is very supportive and an integral part of the show but this other person may have been, you know, developed this and working this and really leading the charge and taking the risk. 

Pancham: Right, right. 

Nothing was developed around for multiple years for many…So it can take years for these shows to develop. And there’s there are lots of costs associated with it long before the show’s fully capitalized. This show has to be fully capitalized before it opens. And you have to hit that minimum before you can technically start spending the money from the LLC.

Pancham: Yeah, so I have a question, right. So for a typical listener of mine, and you know, let’s say for me, I want to be involved in this industry. And let’s say I want to invest hundred thousand dollars, right? So at what point of this particular process, you know, you would start raising money and involve outside investors. 

Matthew: So the thing that’s really important is the way that we look at these. So we’ll talk about that in a second. But I just want to be clear, first off, it’s a super risky investment, and everyone needs to understand that just as investing in anything else, there’s always room for risk involved, the risk in a Broadway show is much, much higher. Likewise, the return can be much higher as well. What’s really important is I think the way that Eric and I go about, we sort of have a three pronged criteria. And the way that we take a look at a show and decide if it’s something that we want to get involved with. Raising the money for the Broadway shows is not something that Erica and I do solely for our livelihood. So we do get involved in these things but it is like usually it’s like every two or three years just sort of depending. But it’s based on three factors. Number one, we look at who the creative team who’s involved in the project, we look at who’s the financial team that’s involved in the project, and then what the actual content is, right? What is the story? Is it a movie that was made? Is it a book? Is it something new? It has that composer done other things before that? What’s the track record of the creative team there? So that’s something that that we look at that’s really important, then in terms of when are we raising money for the show, I mean, it’s definitely before it’s going to open on Broadway. But it really just sort of depends on how they’re doing it because a lot of times shows will do some sort of, as Erica said, they’ve been working on it for maybe multiple years, and it had workshops, and then sometimes they do out of town trials. As an example, we can talk about Moulin Rouge, which is going to open on Broadway this summer. Before it opened on Broadway, it opened up here in Boston, and did it out of town and was very successful. Most of the capital was raised before it even opened here in Boston. And then it did exceptionally well. It got amazing reviews, and then all of a sudden, boom, the rest of it was gone. So it’s like, on these things, there’s a lot of, I think from an investment standpoint, there’s a certain amount of risk. The good thing for us was Erica was invited to a workshop of Moulin Rouge in New York. We’re reading. Right, right, right where she got to see like, a couple numbers. But we knew the creative team. We knew the financial team, the general manager, we knew who they were. And obviously, we knew the show, “Moulin Rouge”. We knew the movie. And from what Erica saw, she said, you know, look, it’s it was just the reading, you know, wasn’t…how long was it? 45 minutes? 

Erica: No, no, it was it was a little bit long. It was a reading. So in that regard, it’s actors at a music stand reciting to show. What was only the smaller numbers was they only showed a few of the big dance numbers, if you will. And so much of a musical is about the set, the costumes and the dancing. Right? The quintessential Broadway. Like that big, big number. We didn’t get to see a lot of that because those especially takes so much coordination to put together. So the workshop that I went to was a full read through of this script, which has changed a bunch since then, for the better. But it gives you a taste of do I think this creative team is working collaboratively? Do I think these actors are talented? Or maybe they’re not the right actors, right? You’re trying it out in a very protected environment. But those are used as though as a way to also talk to other industry people to see if there’s interest in raising money for the piece. Right? And that’s kind of a starting point for someone like me. I get invited to readings pretty often. They’re not open to the public. It’s not something that is available for people because it’s a very specific environment. It really is. That’s a safe environment for the creative team to try things. But those of us who are going, we know that this is not the finished product, and we know that they’re kind of seeing, you know, they’re testing the waters a little bit. And I called Matt specifically after the Moulin Rouge one and I said, “It’s not perfect. I love the source material. I love this team and I can see what I think they’re capable of”. And I know the financial team incredibly well with what we call the general managers. And you know, there’s a whole group of people who oversee kind of the financial decisions on a Broadway show. And I said, and I think, you know, if we’re going to pick one to be our next one, this is the one I would I would bet on, but again, you’re betting on it. 

Pancham: Right. Right. 

Erica: It’s risky. But I said, if we were going to go big, this would be one that I would feel passionately about. 

Matthew: And then just to be clear on that risk, when you look at what you…Erica started investing in this many years ago. She used to invest on the Broadway. She’s done a lot and I’ve been involved with her, have worked and co-invested with her and partnered with her on four of these now, and a lot of them we lose a couple bucks, but when we get the ones that hit it is beyond anything that I’ll ever make in a real estate deal. You know, it’s almost like a roulette, like you’re spinning the roulette table. But the good thing about it is having the insight that that Erica has having been in the industry for so long. You’re instead of betting on 32 numbers on a roulette wheel, maybe you’ve knocked it down to these 10. Right? So you’re, you’re able to reduce that risk, although it’s still there. And Erica has been and I …we’ve been wrong about shows that we did get involved with that did really well. Right. So we’ve met we’ve met, we’ve missed, but you know…

Erica: Great, you know, and I think when Matt talked about our three pronged approach, I don’t regret any of the investments we’ve made. There has been ones that didn’t hit like we would have liked them to. But we’re just as proud to have supported that team. And to have been a part of that show for a variety of reasons, which I think is why we have this criteria that you know.

Matthew: I have, I don’t know if I mentioned this earlier, I have a background in theater too. I mean, I did it in high school in college, and I was actually a professional actor for five years in New York City. Did regional theater and off Broadway and things like that. Now, that was a whole another life ago. That’s not how even how I met Erica. I met Eric years and years after that, but I do have the passion and appreciation for the art…to be investing in this art, even if sometimes it doesn’t make us tons of money. 

Pancham: Right, right. 

Matthew: And then sometimes it does. 

Pancham: So taking this example of either this particular show, Moulin Rouge or the previous one that you raised the money for, how long typically does it take for an investor to make the money back? Or in other words, how long does it take from the day someone writes a check to actually start making some profit? And once the show starts making profit, how is it distributed? 

Erica: So it also depends on when the show’s opening night is and when the raise is happening. So for example, when we were talking about Moulin Rouge earlier, Matt described how most of the money from Moulin Rouge was in or if not all, was in before it opened in Boston.

Pancham: Right.

Erica: Which is not opening on Broadway until summer of 2019. It played in Boston summer of 2018. Which means that any investor’s money in the show is tied up for a full year before any distributions will happen. That’s not necessarily typical. Moulin Rouge is particularly having a longer hiatus for a variety of reasons. But you have to know when you start with these shows, when they get a theater in New York, when’s the talent available? You know, there’s a lot of factors to get all the pieces of the puzzle to fit. However, when this show does capitalize, is normally I’d say anywhere from between typically six to three months before the show is opening. That is when the real capitalization is normally happening. Moulin Rouge is different because it did a huge out of town trial. But a typical Broadway capitalization, I would say is making its final moves about six to three months before it’s moving into Broadway. Then the distributions will not start happening until at least opening night of a shows run. And it’s, it’s great if you get a distribution around opening, but you may not because you understand that it shows, it’s very unlikely. And when I’ve seen it happen, it’s been like a 10% check or something. Now until you get to being fully recouped about, until you’re made whole on your investment 100% all of the distributions go to the limited partners, to the investors. 

Matthew: Right. So let’s be clear about that. Because this is, this is important. This is the structure of how the deals are and this is, this is general, right, this is how 99% of things are set up this way. It could be set up differently. But so all profit goes directly to the investors. So it’s like 100% pref, if you will, on a syndication deal.

Pancham: Right.

Matthew: So all the profits that come in will go directly to the investors until they fully recouped, then once the investor has fully recouped. What usually happens is a 50-50 split. 50% going to the producing entity, or your sponsors or your GP and those sort of real estate world, and then 50% going back to the investors. That’s generally how they’re set up. Again, they can be they can differ, and there’s royalties. And there are other things that kind of…

Erica: There are a few other people who participate in some profit sharing, but for the most part, that’s the very kind of simple way of describing it. But what’s important to understand there is that all of the distributions are going back to the investing entity. And then like Matt said, once it’s recouped, it’s 50% of the investing entity and then 50% of the general partnership and people who might participate in that chair. So you asked earlier, how quickly does it happen? On a hit show…For example, when I worked on Wicked, distributions were made monthly.

Pancham: I see. And how quickly for Wicked it went from 100%…fully recouped the investors. 

Erica: I don’t remember specifically on Wicked. But what I do know is that so there are a few documents that are important when you’re evaluating the investment. One is what’s called a recoupment schedule. And a recoupment schedule is a guideline that basically shows you at with the show running for X number of weeks, with an average ticket price of Y we should make our costs back in X number of weeks. Typically, on a musical if it’s selling very well, it’s expected to be anywhere between six months and a year. Again, that’s if a musical is doing incredibly well. 

Pancham: Right. 

Erica: For conservative shows and you’re looking more at a year and a half, two years. And then you start to look at how many shows can run for two years? How many have the stamina and that’s where you’re starting to evaluate the ticket sales and what’s happening in real time. 

Pancham: Right and what is the exit on this? Like, when does it stop? 

Matthew: When do they decide and how is it is that this is a really, really interesting part and this is where this becomes if you have a hit becomes so much more exponential growth than you ever have it any, any other deal that I’ve ever seen. When you invest on a Broadway show, if you’re investing in the originating production, meaning it hasn’t like been done in London first or somewhere else first, but you’re investing in this initial originating production on Broadway. You then again, this is a generality, but you usually have the opportunity to well, first you get all other productions of that show that get done subsequently pay a royalty into that initial originating company. That’s number one. And then number two, you get the opportunity to invest your pro rata share in additional productions. So let’s say you had a rigid you had invested in the original production of Hamilton as an example on Broadway.

There are now six other productions of Hamilton there’s two us tours is about to be a third one, there’s a production in Chicago, that’s a sit down, there’s a production in London and there’s Broadway. There’s six productions. All five of those productions pay into the one production of royalty. Plus, you would have the ability to have invested your same amount and all of those. So instead of just being invested in one thing, you can basically roll over from profits that you are getting from the initial production into many subsequent productions. And that’s where there’s this exponential growth factor that can happen, which can be pretty amazing. 

Pancham: So how much…for my listeners, how much is that return for a very good show? 

Matthew: A typical return, let’s say….So let’s say, you can lose all of your money. You can have a show that opens on Broadway and closes within a couple of weeks. Not typical, but that can happen a lot of times as well. Show might lose money. A lot of times you do not lose all of it. But when you have a show, that’s a huge hit, whether that’s Wicked or “Phantom of the Opera”, which has been running for 30 some odd years, I mean, thousands of a percent return on your investment. 

Pancham: Thousands of percent. Wow. 

Matthew: Literally thousands of percent. The other thing to keep in mind is let’s say you invested in that original tour of Phantom of the Opera. I don’t know how, excuse me Broadway production of the Phantom of the Opera. We don’t know exactly how it was set up, but it was set up the way most of them are. You asked when does it end. It usually ends a certain period after the Broadway production has closed. So since Phantom of Opera is still running on Broadway, any other subsequent productions are all paying a royalty assuming its set up this way we think it is or paying a royalty into that mothership, if you will, the originating production, and that won’t stop until probably 25 years after it closes on Broadway. 

Pancham: Wow. 

Matthew: So people who are invested in Phantom of the Opera will probably…may die before their investment checks are rolling in and there may be an heir…Something that they pass down to heirs.

Erica: No, it goes to estates. I have done investor relations for shows. And the investments go down to estates because the shows outlive the people. But I think the main one originated in London, but that does bring up a good point though. If you are looking to invest in a show or if you are approached about investing in a show, the first question someone who’s not familiar with the industry should ask is. Is this the originating company? Because if this show has opened in London, or if the show opened in Australia, you know, there are other you know, or out there right or if it’s a revival…that’s a very important distinction, the investing potential…sorry, the distribution potential, the profit potential is limited in different ways. So that’s what I always advice people there. There are two basic things that I tell people when they say, “Oh, I’m interested in getting a Broadway”. Or “Oh, well, my cousin’s going to invest in a show.” You know, I hear it a lot of time, oh, you work in theater…I have a friend who’s, you know, investing in shows or whatever. Or I have a friend who’s interested in this show, you know, what should they know? The two most important things to ask, I think, besides, you have to have the passion for the show and the creative team and the kind of the three criteria that Matt and I talked about for that works for us. But the two most important things that are Is it an originating company, and who are they investing through, because I find that to be very important. Our industry is pretty small, but there’s a lot of relationships, but it’s very important that you understand the person that you’re investing to and how close they are to the lead producer to the general managers. Because these shows have become quite expensive, and there can be large numbers of people raising money for a show. And what I always look to see is that the money itself, how well is this person that you’re investing with going to be able to protect the investment? The further they are from that what we call the general partnership, the more challenging it can be for them to know what’s actually happening with the money on a weekly, monthly basis. 

Right, right. Right. Well, great, thanks for that…sharing all of your knowledge on this pretty you know, I learned a lot on the show. Anything else would you would like to add before we go to the next section of our show? 

Matthew: No, you know, I we have a friend of ours who invested you know, we raised money for Moulin Rouge, we’re producers on that show. And we have a friend who’s a real estate investor who was going to invest. He was interested he was looking it up and he found some quotes somewhere, which I just I love it. And I think it was like specifically about Broadway shows and it said, “You can’t make a living. But you can make a killing”. You know, I mean, the thing is, you can’t count on a show doing exceptionally well, and you never should. You can totally knock it out of the park if you get the right one. And so that’s why, you know, maybe you don’t go into…If you’re thinking about investing on Broadway, maybe you don’t go in there with the idea of Well, I’m just going to do one and see how it does. Maybe you go in there. So you know what, I’m going to do two or three or four over the next five or 10 years, you know, with a little bit of my money, some money that I feel like I can be a little more speculative with and give it a shot. And I think that you might be pleasantly surprised. 

Erica: Yeah, I think that’s a good recommendation actually, that if earlier Pancham has said something about like so if I had $100,000 it might better take the hundred thousand dollars and see if a show will do $25,000 investments and do four different ones. But I also wouldn’t recommend that you do four at the same time, because you also don’t want your shows competing against each other in the same season. You know those successful gets attention and Tony Awards. And normally it’s only one or two shows that get a lot of attention each year. And sometimes it’s unpredictable, sometimes the ones that you think you’re going to do well, all of a sudden, don’t Yeah, there’s this sleeper that nobody knew about that comes in at the very end, and all of a sudden changes everything. But I would say our portfolio rings true as well in the sense that some have lost all of their money. Some have made back a significant portion of the investment, and some have knocked it out of the park. So I think so

Matthew: so much so that it’s covered any other losses we’ve ever had, and then some 

Erica: Right, right. So you have to really look at this. The advice I would give to people who are interested is are you passionate about it? Or do you find it an interesting alternative to other investment opportunities out there? If you do, then you should pursue it. Do you have the kind of income that would allow you to not rely and depend on this and be concerned? And are you looking at the long game here? Because I do think Broadway as it as a long I’ve seen in my own life, I’ve been doing this now for 1520 years. In the long run, it far outweighs the losses. But if you could probably get very quickly deterred if I looked at my first few investing experiences, yeah, I probably still wouldn’t be working in this industry. But I’ve seen enough to know and now I’ve sat it out. And I’m very much on the other end. And like Matt said, it’s covered any other losses that existed previously. 

Pancham: Well, great. I would love to hear when you are going to do the next one.

Erica: You know, I mean, like I said, we only do these when it’s the right creative team and the right show. You know, we did Moulin Rouge, we raised that money, six months, eight months ago. Right? I mean, and we don’t have anything right now in the hopper, but Erica has been invited to things all the time and if something comes along that we feel strongly about, we let people know. And that’s when we raise but we don’t. I think that’s the important thing. There are people out there who also syndicate and that’s how they make their living. And they put together funds, maybe multiple shows, or just do one show at a time or whatever. But that’s how they’re feeding themselves. That’s not how we’re doing it. We’re investors ourselves. And it really came from like a perspective where, like, Erica would have friends and family or I would have friends and family that were like, I’d be interested in investing. And then here, we tell them talking with them. So we’re doing this show, and they’re like, “Oh, you know what, I’d be interested in that”. And that’s kind of where that kind of came from. It’s not how we make our living. We don’t take any fee off of this at all. Now, as producers, if we get a producer credit, then we get some of that producers share once the show’s already recouped, but it’s not like there’s no like acquisition fees or any sort of fees like that, that we’re taking off of this. 

Pancham: Okay, sounds good. So let’s move on to the next round, which I call Taking the Leap Round. I ask these four questions to every guest on my show. So my first question is, when was the first time you both invested outside of the Wall Street? 

Matthew: Well, for me, Erica and I work together at the time, I think when we both started investing. So for me, it was, it was actually a real estate thing, a property that I wanted to sort of put together. And so I bought…I bought some raw land up in, in Connecticut and built the house on it. 

Erica: Not knowing he was forecasting his future at the time.

Matthew: I was working in the advertising industry in New York City. Yeah.

Erica: Which was, obviously was forecasting my future when I was working in a in a Broadway producing management office. I helped them raise money for an off Broadway show, which was really my first time in and I think what’s very important for me, is that I always put in money when I’m raising money. If I’m asking other people to make a financial commitment to a show I’m always right out there on, you know, on the limb with them. So, yeah. So… Okay, probably 22 at the time. Yeah. 

Pancham: Well, all right. All right. So what fears did you have to overcome when you first invested outside of the Wall Street? I mean, the sort of the fear of the unknown. Right. I mean, I’ve made other you know, alternative investments, if you will, things outside of Wall Street, whether it was a Broadway show, first time I invest in a Broadway show with Erica, that was nerve racking. But I think it’s about you know, you have to do you do your research, you do your due diligence, and then sometimes you just have to kind of stay Geronimo and just go for it. You have to, I mean, for me, I’m a very analytical person. I do tons and tons of research, but you can get that sort of analysis paralysis. And for me, it was really about just trusting, trusting myself and trusting my instincts, I guess. All right. And for you, Erica.

Erica: I think for me, it’s interesting because my investing was always tied to raising in the Broadway world. So my fear was always just, “can I can I raise all the money?” And can I really get people to come on this journey with me? And what I learned is when you believe in it, and you are educated enough to know, the reasons why you’re doing it, people come. 

Pancham: I see. All right. My third question is, can you share with my audience one investment? That did not go as expected?

Matthew: Yes, sir. I mean, a lot of my alternative investments outside of Wall Street have been I’ve been real estate. Right? So from a real estate perspective, I mean, I had a property that actually ended up finding out that it was in kind of like a flood zone. That was an issue at one point. I had an investment I was involved in that. It didn’t do well, I was I, you know, the sponsorship team had made some miscalculations and luckily, we’ve got we got out of it scot free, but it looked like we were going to lose a ton of money and so there’s obviously risk involved. I’m sure Erica can talk about some of the Broadway stuff. 

Erica: Sure. The first Broadway show that I raised a significant amount of money for, and I was a producer on. I believed in this show more than anything. I loved it. It was a play. I loved it. I’ll say it again. I loved it. There were so many right reasons to do that show. It was for the Tony Award, it was very popular. And we didn’t win. We didn’t win the Tony Award, and we didn’t have enough money to keep the show running. And we had to close. 

Matthew: I mean, for a play. I mean, plays are really hard to play if it doesn’t win the Tony. I mean, there’s musicals we didn’t win the Tony. Right? 

Erica: Right. 

Matthew: And it’s done exceptionally well, but for a play. Like if it doesn’t win the Tony, that’s almost the kiss of death, wouldn’t you say? 

Pancham: Yeah, plays are harder. You know, musicals are much more popular and you Pancham even talked about going to see shows, I bet all the shows that you’ve seen are musicals. Right? It’s more what people associated with Broadway. The tourism for musicals is way higher. And a big Broadway…big splashy Broadway musical is what everybody loves. You know, who doesn’t love seeing people dance their feet and beautiful costumes with awesome good…It’s just, it’s just a great night out. And plays are much more passion projects, and they can be amazing. But overall, they’re never typically the type of potential as a musical. But musicals cost more. So it just depends on which end of the, you know the spectrum you want to be at. But I love, I love a lot of plays. And I love that one. And it was it was heartbreaking at the time, but it was worth it. 

Pancham: Well, what I say is that you do it and you learn those are you know, just like you go to college and pay a fee. This was your learning experience and you paid for it. 

Erica: That’s very true. Right. All right. 

Pancham: My final question is what is one piece of advice would you give to people who are thinking of investing in the Main Street that is outside of the Wall Street? 

Matthew: I think the most important thing is to invest. It’s the team that you’re investing with, right? Most people that you know, like and trust, right. So I think that’s the most important thing. Who is that person that’s doing the raise? What are they? Are they a decision maker? Are they a general partner? Or not? Like, where are they in that sort of pecking order? And who are they? How well do you know them? Because that is really important. You know, I mean, that’s going to make or break the deal. I think a lot of the times for me I don’t invest in, in projects with people that I that I don’t know or don’t know, people who’ve invested with them, you know, who have given them a very strong recommendation. 

Pancham: Right. Very sound advice. Anything else you’d like to add Erica to that? 

Erica: Yeah, I would just say be passionate about it, whatever it is, you know, there are so many different things to invest in. I’m grateful that I found something that I was passionate about from a very young age and that there is a way to not just work full time in that industry, but to also on the side. You will do the investing and fundraising that we’ve been doing, but I think you have to like Matt said, I love that was talking about the relationships because I think relationships are so important. That is how you have that trust and belief. But be passionate about it. Whatever it is, if it’s owning a bunch of restaurants and you love food, great, you should do that. If it’s about making a bunch of parking garages in a city you love, great, do it. Whatever you’re passionate about. Because I also think we all know that it’s very hard to predict what investment is a short thing. But if you’re passionate about it, you at least have a reason for why you did it and with your investors. Of course, the number one thing with your investors that you’re looking at is the profit potential and everything like that. But if you also have a passionate reason and you followed your heart, as cheesy as that may sound, you have other reasons for also doing it. And I think that helps. If for some reason the investment doesn’t go the way you want to financially. 

Pancham: Wow, that’s such a sound advice. Thank you so much for sharing a wealth of knowledge today and how can listeners reach you? 

Erica: Oh, sure. I’ve a website for our producing company, which is avalonroad.net. You can read about me and my background, you can see some of the shows that we’ve been involved in there. And there’s a way to contact me through that website as well. 

Pancham: Great. Thank you guys for taking time today and coming on to the show. 

Matthew and Erica: Thank you for having us. Thanks, Pancham, was great. 

Pancham: Have you ever wondered why the rich keep getting richer? What is the secret that they know? But you do not. What if I told you that wealthy people make their money work for them in two different places? Yes, the same dollars invested into different places and working hard for them while they sleep. They utilize these special accounts that have been in existence for more than hundred years. Do you want to learn more about these accounts? Then you are in the right place? Listen to the episode number five by going to the goldcollarinvestorbanking.com/banking show. I repeat the goldcolorinvestorbanking.com/bankingshow or visit the goldcollarinvestorbanking.com. Thanks for listening if you have questions email me at p@goldcollarinvestor.com. That’s p as in Paul@thegoldcollarinvestor.com. This is Pancham signing off. Until next time, take care. 

Thank you for listening to the Gold Collar Investor podcast. If you love what you’ve heard and you want more of Pancham Gupta visit us at www.thegoldcollarinvestor.com and follow us on Facebook at the Gold Collar Investor. The information on this podcast our opinions as always, please consult your own financial team before investing




Show #22 - Matt Picheny & Erica Schwartz

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