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Startup Legion M Launches Crowdfunded Studio That Lets Fans Buy Piece of Company

In the crowdfunding model as it has emerged in the past few years, entrepreneurs solicit donations for individual projects, like films or TV shows, promising to reward investors with the finished product or other prizes.

Now comes a startup that wants to crowdfund a Hollywood studio: Silicon Valley startup Legion M is offering anyone the chance to bankroll the company and its slate of entertainment projects.

The company is taking advantage of new rules adopted by the Securities and Exchange Commission under the 2012 JOBS Act, which is designed to make it easier for smaller companies to raise capital via public markets. Legion M was founded by Paul Scanlan and Jeff Annison, two of the co-founders of MobiTV, a company that delivers video to mobile phones and other connected devices.

Legion M has not announced what its initial movie, TV or other projects will be. At this point, it has teamed up with three creative partners: Stoopid Buddy Stoodios, the animation studio behind Adult Swim’s “Robot Chicken” and Crackle’s “SuperMansion”; Gaston Dominguez-Letelier and Meltdown Comics, an L.A. comics and comedy space; and Animal Repair Shop, a new content studio from the alternate reality gaming pioneers Susan Bonds and Alex Lieu of 42 Entertainment.

The idea: By letting fans buy shares in Legion M (starting later this summer) and inviting them into the development process, they will work to promote the studio’s success because they are both emotionally and financially invested in it.

“It’s not just about funding the next ‘Robot Chicken’ – it’s to grow what will ultimately be an entertainment company that has stature in the industry,” Scanlan said.

Legion M will set a minimum investment of $100-$200, and it will also set a maximum limit. “We really want fans,” said Scanlan. “We would rather not have the money if it all came from Wall street investors who aren’t fans of what we are doing.”

“The return will be in the shareholder value we create,” he added, and said at a future date Legion M may issue dividends like any other public company. The company’s current ownership includes Scanlan, Annison and several angel investors; their stakes will be diluted as new investors buy into Legion M. The SEC rules for the JOBS Act specify companies can raised no more than $50 million, and investors are not allowed to invest more than 10% of their annual income.

It’s not clear that in the absence of any track record of Hollywood success, Legion M will attract a stampede of investors. But the startup’s partners think the model holds promise.

“Connecting with fans who have such a passion for the wide variety of content that emanates from Stoopid Buddy Stoodios means everything to us as creators, and Legion M’s new model presents an exciting new way to take fan engagement to the next level,” said Stoopid Buddy Stoodios partner Matthew Senreich.

While the SEC requires companies raising funds under the JOBS Act to comply with registration and financial disclosure regulations, it’s a much easier process than filing for an IPO, Annison said. “If you want to take a company public traditional way, it takes literally millions of dollars,” he said.

Legion M’s headquarters is in Emeryville, Calif. — just down the street from Pixar, Annison noted. The company, which currently has five employees, also plans to open an L.A. office in the near future.

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