Guest Blog's picture

Crowdfunding Can Help Breweries Survive During COVID-19

Crowdfunding Can Help Breweries Survive During COVID-19

The Paycheck Protection Program (PPP) was officially launched last week and has raised several major questions for brewery owners. Does my business qualify? When will the money come? How much will it be? These questions around the Small Business Association’s program make it difficult for brewers to make informed decisions around production and staffing. However, there is an alternative method to raise capital despite these uncertain conditions: equity crowdfunding.

A large portion of the US’ 7,000+ breweries are seeing revenues drop precipitously as responsible citizens comply with their state’s COVID-19 quarantine and containment practices. In some markets, like Massachusetts, many breweries have been able to institute ‘To-Go’ sales by implementing touch-free transactions, socially distanced wait lines, and providing staff with protective equipment to limit their exposure to customers. However, the bulk of most breweries’ revenue comes from selling their product in the taproom, restaurants and local bars. Brewery owners can provide a lifeline for their operations by executing a crowdfunding campaign that has the potential to energize their fans, investors, and community members, while gaining access to needed capital.

Kickstarter, GoFundMe and Indiegogo gained prominence in the 2000s when they were used by gadget makers and small consumer products companies to raise money for unique products. However, full-service platforms like Fundopolis could help breweries raise up to $1,070,000 – and that number could jump up to $5 million if the SEC’s proposed revisions to Reg CF are passed. This is a marked difference from having to jump through hoops to prove their business is worthy of a bank loan or outside investment, all while losing control over the terms.

Regulation crowdfunding has been used by savvy breweries to raise money from ordinary people and angel investors. In fact, Fundopolis helped Vector Brewing hit their $50,000 minimum goal in just 48 hours last month. One of the biggest advantages of crowdfunding is that brewery owners can raise the money on their own terms, rather than negotiating with venture capitalists or investors that don’t always value the art and science of crafting beer. There are three primary options, each with their own pros and cons:

  1. Debt – This is a simple standard loan. Breweries have flexibility in the interest rate of their loan but need to be competitive enough to attract investors.
  2. Revenue Share – Investors would receive a percentage of a brewery’s revenues until the total loan is paid off. This option foregoes monthly payments in favor of a much more brewery-friendly system that scales payments as revenue increases. Revenue sharing is particularly helpful for fledgling breweries that are building their brand and can’t afford a large monthly payment.
  3. Equity – This is the traditional venture capital model where brewery owners offer investors a piece of their company in exchange for capital. This option has the potential for a greater return so breweries that choose equity are likely to attract investors that are savvier and have access to greater sums of money.

Each of these options provides business owners with the ability to maintain control of their business, appeal to different types of investors, and provide their customers and community leaders with an opportunity to share in the brewery’s success.

It’s important to note that crowdfunding isn’t a “set it and forget it” initiative. Breweries will have to devote resources to draw attention to their campaign and generate buzz that attracts investors. Luckily, breweries already spend a huge percentage of their budget on marketing – including beer can design, social media, logos, merch and amazing taproom experiences – so executing a campaign that energizes customers is in their DNA.

Much like the Kickstarter campaigns of yore, breweries can use their regulated crowdfunding campaigns to build brand equity and momentum for their business while raising capital. The top craft brewers are some of the most sophisticated brand artisans and marketers in the country, which gives them a huge advantage over the typical crowdfunding campaign. People are literally investing in their favorite brewery and are therefore more likely to tell their friends about the opportunity and perform important word-of-mouth marketing if properly incentivized. Crowdfunding investments are tangible tokens of customers’ affection for a brewery and can create significant brand loyalty.

In the past few years, breweries have become integral pillars within their communities. They not only create excellent beers but also create jobs, offer communal spaces, and even benefit nearby businesses by attracting people outside of the neighborhood. Brewery owners have proven to be resilient and resourceful as they’ve been forced to navigate their city’s byzantine liquor and licensing laws, and COVID-19 is just the latest hurdle. While so much is uncertain in the world, particularly within the economy, small business owners should strongly consider a grassroots crowdfunding campaign if they need access to capital to keep their operations running and employees paid.

If you’re interested in learning more about how your brewery can use crowdfunding to raise money, Fundopolis is here to help. Breweries that can demonstrate established profitability and a good social media following can raise between $10,000 - $50,000 with zero upfront fees, interest-free and payment-free debt offerings for a year, and a 50% reduction in escrow and platform fees: https://about.fundopolis.com/covid19offering/. We’re happy to answer any questions to help determine if crowdfunding is right for your brewery.

Advertisement

Advertisement