Akasha looks for $2m to fund growth
Akasha Brewing Co.’s equity crowdfund closed in June and raised $1,733,040.
Akasha Brewing Company has officially launched its equity crowdfunding offer today, looking for up to $2 million to fund its ambitious expansion plans.
The Sydney-based brewery opened its expressions of interest last month on equity crowdfunding platform Equitise and the offer has now been opened to investors who signed up during the EOI phase. If there are any remaining shares after this, it will be opened to the wider public later this month.
Dave Padden, founder and CEO of Akasha, said the time was right for the capital injection.
“Last year was our seventh year which was quite amazing, because we still feel like a startup in growth mode. Last financial year we grew over 35 per cent. We got our management team together and our entire team to involve them in our five-year vision,” he told Brews News.
Padden explained it was a decision between being content with being a Sydney brewpub with award-winning beers, or expanding further.
“We believe there’s still a lot of growth opportunity,” he explained.
The five-year plan outlined in Akasha’s offer documents suggests that along with an injection in working capital, the funds will go to upgrade its current brewhouse to 24hL, aiming for production growth to 1.5 million litres annually.
If the maximum is raised, it will invest in new brewery and hospitality sites in Victoria and Western Australia. It will require further funding to complete its intended activities if this maximum is not raised.
“We looked at all of our options in terms of funding, we already have debt funding so we didn’t really want to do much more of that, we looked at private equity and that wasn’t really for us. We really didn’t want someone taking a big chunk of the business and wanting returns quickly.
“Over the seven years we’ve developed a healthy, what we call a superfan base, they love what we do, they love being part of what we do and we thought how can we give these fans more? Crowdfunding brought those things together and allowed us to bring these people in closer.”
The offer of fully paid ordinary shares in Akasha Brewing Company sees shares priced at $6 each. Akasha is hoping to raise between $500,000 and $2 million, the maximum of which will see between 12.6 per cent of the business in the hands of the new shareholders.
Its maximum subscription would see it valued at $15.9 million. Padden explained they were conscious they wanted to offer the business at a moderate valuation.
“We’re very conscious of if people are investing in your company, it needs to be a fair valuation,” he said.
“Yeah there are a lot of cool benefits that come along with it, but we thought three to four times revenue was a fair valuation, based on our last financial year.
“We’ve put a lot of thought behind what sort of profit margins we want to be seeing over the next few years. We will be reinvesting any of those returns back into the business to help fund that growth, but we do see at some stage in the future showing a level of return to investors.”
Other businesses which have undertaken crowdfunds have been varied in their valuations, with some like BrewDog AU valuing the business at $100 million – 18.9x its revenue – but others have been more conservative.
In its offer document Akasha also revealed its financial information. Total revenue for 2021 was $3.9 million, it reported. Gross profit reached $1.5 million, but operating expenses meant that the business returned a net loss of $246,683 in 2021.
The brewery is predicting revenues of $4.3 million in 2022 and a return to EBITDA growth, upping this to $6 million and $500,000 in EBITDA in 2023.
Investors will also receive benefits, from discounts, Inner Circle beer club membership, merchandise and an investor name plaque, amongst a number of other awards based on contribution.
Padden explained, in contrast to other businesses that have undertaken crowdfunds, that while its growth plans were not geared towards preparing the business for sale, they would consider an external offer.
“We haven’t set out in the beginning and we’re still not preparing for any M&A activity in terms of someone purchasing us, but having said that, we would always consider something if it was advantageous for shareholders, it’s as simple as that.
“If it allows us to get where we want to a little bit quicker then yes, but it’s certainly not in our immediate vision or plan.”
Padden also said that brewers considering an equity crowdfund should go into it with their eyes open.
“To get ready for this growth we’ve hired new staff, we’ve brought in a new marketing director and she’s been pretty busy, we’ve spent a lot of time finding some amazing people to help us out on the management of the business and in sales.
“[Marketing director Lauren Jones] is putting together a communication plan for investors going forward, so we want to be in regular communication with them.
“It really is an involved process, but it’s a really valuable process to go through anyway, you really have to pull apart your business, look at how your business operates, look really closely at the numbers.
“Sometimes people don’t have a deep understanding of the numbers that are behind their business and it really makes you take stock of what you’re doing.
“But you really need to be clear about your strategy and your vision. I wouldn’t embark on this unless you’ve spent a lot of time nailing down what your vision and your strategy moving forward looks like. It’s really important you’re able to communicate that to investors.”
Hear more about Akasha Brewing Co. on the Beer is a Conversation podcast with Dave Padden.