Brewery & Distillery Crowdfunding
Increasingly we are seeing more and more craft breweries (independent brewers) and distilleries raise capital through crowdfunding campaigns (both reward based and equity based).
Crowdfunding has been available in Australia for a number of years in one form or another. Traditionally, crowdfunding has been limited to charitable or ‘rewards based’ campaigns (i.e. if you invest $x, the company will give you a reward usually a limited release product etc.). In late 2018, the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Act 2018 allowed propriety limited (i.e. Pty Ltd) companies to offer ‘equity’ crowdfunding. Equity crowdfunding allows the general public (i.e. retail investors) to buy shares in companies through crowdfunding campaigns. Businesses can crowdfund up to $5,000,000 in a 12 month period. Essentially, a crowdfunding campaign involves a business preparing an ‘Offer Document’, having their offer published on a crowdfunding website (often called a platform) and marketing the offer as widely as possible, generally through social and traditional media.
Crowdfunding in the beverage industry
Crowdfunding by its nature is adapt to certain businesses and industries. One such industry is the alcoholic beverage industry, in particular breweries and distilleries. Many people want to own a part of the alcohol brands they consume or identify with. The UK based equity crowdfunding platform Crowdcube is testament to this having hosted a large number of successful campaigns including various BrewDog raises. BrewDog has famously crowdfunded their expansion, opening a brewery in Ohio, their ‘beer hotel’ and a series of bars including one planned for Brisbane (expected to open in 2019).
Similar success has been experienced in New Zealand with ParrotDog raising NZ$2m through PledgeMe. Internationally, crowdfunding has been used by brewers as far back as 2010 with Mystery Brewing Company of North Carolina raising $43,000 through Kickstarter. Businesses such as Crowdbrewed.com have developed around this demand. Similar rewards based crowdfunding campaigns have been run in Australia with:
- The Sparkke Change Beverage Co raising $102,827 from 819 investors in 2016 (through our friends at Pozible).
- Black Hops Brewery raising $17,805 in 2015 (with a $10,000 target that they met within a day) through Pozible.
- The Eleventh Order Brewery raising $5,015 from 38 investors in 2017 (through our friends at ReadyFundGo).
- Mitta Mitta Brewing Company raising $35,150 from 105 investors in 2017 on ReadyFundGo.
- Your Mates Brewing Co raising $32,575 from 228 investors in 2017 through Pozible.
- Great Barrier Beer raising $92,206 from 122 supporters in 2018 through Pozible.
- Sinkhole Gin raising $50,203 from 348 investors in 2018 through Pozible.
Since equity crowdfunding became legislated in Australia, we have seen a number of brewers and distillers operate successful equity based crowdfunding campaigns. Notably, The West Winds Gin raised $933,500 from 290 investors on Equitise (well above their minimum of $500,000).
Brewery & distillery equity crowdfunding offers
There are a number of brewery and distillery equity crowdfunding offers in the market currently including Endeavour Brewing Co who are seeking to raise a minimum of $305,000 on Equitise (which at the date of writing had hit its minimum raise amount). Endeavour were the first Australian brewery to launch an equity based crowdfunding campaign. Other breweries have quickly followed with Black Hops launching their campaign and reaching their maximum raise of $400,000 in just 6 days through Birchal. The successful raise by Black Hops makes them the first craft brewer to successfully complete an equity crowdfunding offer in Australia. Equitise is also advertising an equity crowdfunding raise for Australian Boutique Spirits which own a range of spirit brands.
Crowdfunding: a growing method of raising capital
The crowdfunding industry is quickly growing with breweries and distilleries increasingly utilising this method of raising capital. Ramsden Lawyers have an experience team of commercial lawyers who have experience in both crowdfunding and beverage law.
Ramsden Lawyers regularly offer guidance on:
- outlining the various benefits and risks of crowdfunding and providing an overview of the process and requirements;
- identifying the most optimal target market for your offer;
- developing a funding strategy that blends Crowdfunding with other available alternatives (such as small-scale offerings, debt facilities, and so on);
- establishing important details such as terms of the offer;
- ensuring internal policies and governance satisfy legislative requirements and are sufficiently robust to take on additional shareholders; and
- providing ongoing corporate advisory services both during and after the Crowdfunding raise.
If you are considering a crowdfunding capital raise (either equity or reward based), consider speaking with one of our lawyers first to ensure that your raise is appropriate for your business.