Queensland’s 4 Brothers Brewing has closed its debut equity crowdfunding round without reaching the minimum investment targets, highlighting the challenges with crowd-sourced funding campaigns.

Toowoomba-based 4 Brothers Brewing Pty offered fully paid ordinary shares at $0.80 per share to raise a maximum of $200,000, with a minimum goal of $160,000.

4 Brothers hit $35,634 in their month-long campaign, which closed on 1st December.

The PledgeMe campaign offered a mix of reward and equity crowdfunding, with four levels of rewards for those pledging between $100 and $10,000 or more.

4 Brothers launched the campaign on 1st November, with expressions of interest open from the beginning of October. Founder Adrian Cubit said that it would use the funding to expand, upgrading the microbrewery’s 200-litre kit.

Anna Guenther, co-founder and CEO of PledgeMe, told Brews News that in the event a campaign doesn’t hit its goal, investors are notified that their funds will not be processed.

“We touch base with campaigners to make sure they understand this isn’t a statement about their business – it might just not be the right time or the right messaging for their crowd,” Guenther explained.

“No capital raising method is ever 100% successful, so campaigners shouldn’t take it to heart if they don’t make it to their goal.”

She said that Australia is “still getting its head around equity crowdfunding from an investor perspective”.

“We think that may have been an issue [with the 4 Brother’s campaign], as campaigners often need to educate their crowd on what equity crowdfunding actually is (and that you can’t promise returns) as well as getting them to pledge.”

Guenther said that the biggest lesson they had learnt is to get your potential investor audience ready and educated before launch.

“Even if they say they are keen, it still might not be the right time or the right messaging when you launch,” she said.

“So pull your crowd into the development of your plans, and make sure you have support when you launch so it’s not just you doing all the work.

“I just want to say that Adrian did an amazing job of preparing his campaign and his plans.

“But it can be really hard for solo founders doing it all to raise capital on top of their day jobs. I can’t wait to see what Adrian achieves in the future, I know it will be awesome things.”

Crowdfunding campaign strategy

Richard Slade, director at Brand Refinery, a UK-based specialist crowdfunding consultancy, said that if the Australian market was anything like that in the UK, it would soon become a crowded place.

“Increasingly in the UK, and I suspect soon in Australia, [we will see] a challenge of campaign saturation,” he said.

“Crowdfunding for artisan and micro-breweries is now de rigueur and incredibly popular as it creates the chance for breweries to be even closer to their drinkers.”

This saturation is definite risk in Australia where a number of breweries have already undertaken crowdfunding campaigns despite the relatively short time in which crowdfunding has been allowed.

But there are things that can be learnt from the UK crowdfunding experience.

“Whilst every campaign owner feels that their campaign is unique and different from the ‘norm’, the great campaigns truly understand the difference between good and great and place a much stronger emphasis on being transparent about their goals, developing attractive and thoughtful investor rewards and championing their achievements,“ Slade said.

He explained that having a clear, transparent goal was key to a successful crowdfunding campaign.

“Crowdfunding to service existing demand and build new infrastructure to increase production volume is a clear sell to an investor, over fundraising for ‘Marketing’ or ‘Recruitment’,” he said.

“When it comes to promotional activities, don’t fall into the trap of telling everyone how great you are. That’s exactly what all of the other multiple brewery crowdfunding campaigns are doing.

“Building endorsement from independent, verifiable, experts and bodies and showcasing credible awards is going to be much more attractive to potential investors.

“Being clear about exactly what a campaign owner needs, and exactly where it’s going to be spent is crucial. Don’t assume the investor audience will connect the dots for you, you have to ensure clarity throughout all of the campaign materials.”

There are some commonalities between unsuccessful campaigns, he said, which potential crowdfunders should be aware of.

He said he was a proponent of the adage that ‘planning prevents piss poor performance’.

“Time and time again we are called by clients who are about to go live with an equity campaign and are concerned over the level of traction they have and how this is going to convert into investment,” Slade said.

“The preparations for the campaign are understandably affected by the day-to-day running of their existing business, and it never becomes a problem until it is a real problem.”

He said a healthy pre-launch phase lasts for up to three months, and marketing plans should be targeted at various audiences, including ‘aficionado investors’, existing customers, and their professional and personal networks.

“Quality marketing materials – particularly the video being used, and the pitch materials need time to be created properly so that they will resonate as intended,” Slade said.

“It’s an exciting time for the Australian market to grow given the relative success of the UK equity crowdfunding scene.

“I think the key learnings are to avoid jumping on the bandwagon without a clear and convincing story to tell, it is no panacea.

“Ensure you have a campaign crafted with the same love and attention as your craft beer and you have the building blocks to do very well.

“Finally, don’t be afraid to innovate in your investor perks and rewards – there is a real opportunity to differentiate yourself from the crowd here and it is often overlooked for more of the ‘safe’ offerings such as discount beer, exclusive merchandise etc.

“Think once-in-a-lifetime opportunities that work brilliantly across social media and enhance the appeal and attraction to your brand – never forget that craft beer is as much about the community as the beer itself.”