Black Hops launches second equity crowdfund
Update 27/01/22: Black Hops successfully closed its equity crowdfund in less than 24 hours, raising its maximum of $2.2 million.
Black Hops said in a social media post that they had seen “incredible” support for the business and its crowdfund, and did not even have a chance to open to the public.
It is the biggest equity crowdfund in the brewing industry thus far, beating Spinifex Brewing Co.’s $2 million capital raise last year.
Gold Coast brewery Black Hops has opened its second equity crowdfunding campaign to help fund major growth plans for 2022.
On the back of its GABS Hottest 100 wins over the weekend, Black Hops has opened its crowdfunding campaign on the Birchal platform to potential investors who signed up during its Expressions of Interest phase today, before opening it to the wider public.
“We did do an investment round at the start of COVID,” explained Black Hops co-founder Dan Norris.
“We got funding from the bank and whatnot, but we have such a big expansion going on that the more finance we get the better, and I like crowdfunding, it suits our brand really well.
“We do need the money, we’re taking over the sheds, doubling the size of our floorplan [and undertaking] a million dollars of brewery and cellar upgrades.”
According to its investment offer documents, Black Hops is planning on building a Gold Coast gin and whiskey distillery, under a new brand, Pine Ridge Distillers, and opening its fifth taproom.
The fast-growing brewery is aiming to increase capacity at its second brewery to more than 10 million litres a year. It is currently producing 2.5 million litres annually.
Plans for this year which will be aided by its crowdfund include upgrading its packaging line to a 24-head rotary CFT machine and semi-automated line, to enable up to 250 cans a minute.
Black Hops also released its financial accounts, showing that last year revenues doubled to $13.8 million for the year to 30 June 2021, up from $6.9 million the year before. It also said it had “navigated the brewery valley of death” and gone from a loss-making business to having EBITDA of $1.8 million and profits of $725,740 in its most recent financial year.
Black Hops was bullish about the future for craft beer, using the US market as an example. However the brewery did highlight the risk in the beer market in that beer consumption as a whole is decreasing, but argued that craft beer sales are increasing year- on-year.
“Our business is still going really quickly,” explained Norris.
“I don’t know what other businesses are performing like, but we’re definitely growing more quickly than we want it to – it’s much more difficult to grow 100 per cent every year the bigger you get. So growth might slow a little bit, but there’s plenty of appetite.”
Valuations and crowdfunding
Black Hops’ latest campaign aims to raise a maximum of $2.2 million at $3.77 per share, according to the investment documents. It is offering 583,554 shares for this maximum amount, totalling 3.27 per cent of the business.
“Valuations are always something you don’t know, until quite a bit down the track, if you got it right, we do loosely base it on revenue multiple,” explained Norris.
“There’s also so long you can value at six times revenue or whatever it is, I don’t understand valuations – if people think its good value they will invest, if it closes fast we undervalued, if it takes longer or doesn’t reach goals, we overvalued it.
“You look at some of the sales of breweries like Stone & Wood, if any of these companies getting built now are on that path and are worth that kind of money then this looks like nothing!
“I like the idea, though, of it being a good deal and that people being happy they invested in it. Some people were saying $18 million was too high a valuation last time, but it seems that was a good deal now!”
Black Hops and crowdfunding
Black Hops is no stranger to crowdfunds, having previously undertaken reward-based crowdfunding campaigns to open its first taproom.
It was also one of the first breweries in Australia to undertake crowd-sourced funding (CSF) in 2019.
“We’re in such a different position now than when we did it at first, it’s crazy, we’re a totally different business so there might be way more people that are keen to be part this time.
“Because it was so small last time, a lot of people missed out. But it was small, that was how I wanted it – I didn’t want it to drag on forever and ever, and it was one of the first ones, so I really wanted it to go well.
“We could have definitely raised more, but we didn’t need that more at the time, right now everything has just grown so fast.”
Its first equity crowdfund raised $400,000 in six days, following which Black Hops opened its second venue, Black Hops II, invested $3 million in a new canning line, and acquired Semi-Pro, giving it a presence in Brisbane.
This time round, Black Hops has been able to navigate the challenges faced by breweries which undertake a campaign, from communicating with potential and existing investors to arranging investment documents, with the benefit of hindsight.
“I love dealing with investors, we give our investors quarterly updates, they have my email and phone number, we have 550 at the moment and I’m guessing we’ll get a lot more. I don’t find it difficult, I used the template we had before and wrote the whole thing myself and the video was really fun and we did it one day.”
Norris explained it was part and parcel of a brewery that wants to crowdfund to be transparent, and not bite off more than they can chew.
“Our approach is to be as honest as possible. Don’t commit to too much. We told our investors the first time that we’re going to build a second brewery and that was when we were 90 per cent complete. We’re using the funds this time to do this expansion, and our equipment is sitting in a shed already.
“Be honest about dividends, and your intentions to sell or otherwise and the right sort of people will invest – I had someone message me after the webinar saying that they don’t want to invest because we don’t want to sell to the majors, but they would stay as a customer and that’s fine.
“Brands get into trouble when they commit to too much. Everything costs more and takes longer than you think and that’s not a good look.
“But honesty is the best policy, and making sure that investors are getting a good deal.”
The Black Hops equity crowdfunding campaign on the Birchal platform has gone live to EOI investors. At the time of the publication of this article, it had reached its minimum of $500,000 and was tracking upwards.