Wave of equity crowdfunds underway
Additional reporting by Vivien Topalovic.
A wave of breweries in Australia and New Zealand have undertaken equity crowdfunding recently as capital raising continues its post-COVID resurgence.
This renaissance was heralded earlier this year by crowdfunding platform Birchal, which says it supports 73 per cent of the crowd-sourced campaigns in Australia. The platform said it raised $62.4 million in its 2022 full year across 68 crowdfunds.
Birchal takes 6 per cent of approved investments, on top of a $2,800 fixed fee, which indicates that the platform could have made $3.9 million from the raises. Earlier this year, it also raised $3 million for its own crowdfunding campaign.
Food and beverage was the most invested industry in the year, Birchal said, highlighting the growth in beer and alcohol-related businesses – which accounted for $15 million across 12 campaigns.
This year looks set to be a repeat of this trend towards equity crowdfunding capital raises, with Valhalla Brewing Co, Your Mates Brewing Co. and Blackflag Brewing Co. on the Sunshine Coast, Otway Brewing and Wilson’s Brewing also undertaking equity crowdfunding raises.
We took a look at who is raising, what stage they are at and how they have found the experience so far.
Blackflag Brewing Co.
In addition to opening its new brewery this week, Blackflag Brewing Co. has launched a crowdfunding campaign with expressions of interest currently open for the next 10 days.
Steve Barber, chief executive officer at Blackflag Brewing, told Brews News that the preparation process to crowdfund was quite onerous.
“It’s a deep dive into your own business with a detailed look at history, operations and future strategies. On the brightside, we got to revive our plans and quantify operations,” he said.
“We considered the crowdfund to be the best way to engage with our core audience and allow the partnership to grow with more depth. What’s better than having 500 owners out there sharing the love?”
The main aims for the crowdfund are to expand capacity at the brewhouse.
“We need to expand on our brewhouse immediately. We are still in the process of hooking it up but conscious that the volumes we are producing offsite won’t be contained within our current facility. That will be coupled with our marketing and promotional strategy getting a boost,” explained Barber.
With an emphatic warning to fellow brewers looking into crowdfunding, Barber suggested time management was key.
“NEVER DO THIS WHILE OTHER PROJECTS ARE ON THE GO!!! It’s all consuming and stressful. I would suggest calling someone who has done it to get the framework before attempting.”
The Otway Brewing Group launched a crowdfunding campaign last month, with expressions of interest open for the next three days.
CEO and co-founder Andrew Noseda said crowdfunding was the right option for the company, which owns brands including Prickly Moses Beer, the Great Ocean Road and Queenscliff Brewhouses, Apollo Bay and Queenscliff Gin, Nitro Vodka, and Forbidden Fruit Cider.
“Crowdfunding is a more open way of offering to investors,” he said.
“By using a crowdfunding platform, we’re really opening it up to anyone who follows us and supports our business, rather than just trying to find half a dozen people that we think support our business, it allows a lot more people to be ongoing support for our business.”
The purpose of the campaign is to fund expansion plans, which includes the whisky market.
“All of the money we hope to raise is being reinvested into our two freehold sites so it improves the value of real estate of what we’re doing,” Noseda said.
“So at our Otway production site, we’re proposing to build new infrastructure in terms of shedding. We’re buying new equipment, extra distilling equipment to up our distilling capability, and then it’d be cashflow put directly into the production cost of putting more whiskey into inventory, which goes straight on the balance sheet.
“And then we’re spending more money actually securing and improving our freehold hotel in the coastal town of Queenscliff, so it’s a great long term investment for the investors and where we’re putting the money.”
With many other crowdfunding campaigns underway at the moment, Noseda explained that competing isn’t an issue for Otway.
“We don’t feel we’re directly competing with another brewery in our own backyard at the moment,” he said.
“So therefore, we feel that we’re actually targeting this towards a majority of potential investors and people who currently support the brands and all currently reside within the region in which we operate.
“They know of the brand and they know the property so they’re investing in something quite tangible in terms of knowledge, and are aware of where we are.”
Behemoth Brewing Co.
Behemoth Brewing Co. has closed its crowdfund, which launched as an application process, and closed on 30th October after raising $3,158,257.
“We believe that our customers are our biggest advocates, so giving them ownership in Behemoth makes sense to us,” Behemoth co-CEO Andrew Childs said when they launched the crowdfund.
“Being capital raise #3, we have learnt a lot. The first one was so stressful we said “never again” but The Snowball Effect team is so professional.
“In terms of advice to others, do the prep work, you really need an audience and following to be successful, so I guess don’t try and raise capital too early on in the piece.”
Valhalla Brewing launched its crowdfund offer last week, and has achieved its minimum subscription of $250,000.
The business is currently looking for a $750,000 maximum subscription to help fund its new 15hL brewery in North Geelong, and a taproom. With the expansion, the brewery is set to have a 500,000 litre brewing capacity per annum.
“We signed a lease on a property in North Geelong. We’ve ordered a brewery and paid a sizable deposit on it. We’re just now looking for some additional funds to help complete the project,” founder and managing director Scott Hunt told Brews News.
Valhalla’s previous crowdfunding experience is what led the business to the equity crowdfunding route, according to Hunt.
“Crowdfunding is sort of in our DNA, I guess. As a company, we crowdfunded, not equity crowdfund but crowdfunded, our first two beer releases around six years ago,” he said.
“What that experience gave us, was just a really good community of supporters who, to this day, still support us in the brand, and still feel like they’ve contributed to where we’ve arrived today.”
Hunt also noted the importance of business transparency and regulatory obligations.
“We’ve got a good legal team and accounting team behind us. They made sure that we were ticking all the boxes as far as what we’re required to report,” he explained.
“I think we have a very close knit community around our brand I suppose. We want to make sure that we do the right thing by them. This is not a cash grab. This is not free money as I think it’s been reported.
“It really is involving our community and making them a part of our journey so we’ll do everything that we not only have to but what is right as well, in order to do the right thing by our supporters and our investors.”
As of writing, Valhalla Brewing has raised $290,688, with the investment stage of the campaign closing in six days.
Wilson Brewing Co.
Wilson Brewing Co. closed its Birchal crowdfunding campaign last week raising $797,236.80 for the business and its expansion plans.
General manager Brendan Downes said the reason the team wanted to undertake an equity crowdfund as it allowed them access to potential investors that did not need to be categorised as sophisticated investors when investing less than $10,000.
While the benefits of an equity crowdfund are clear, the whole campaign required major investment, Downes explained.
“The entire campaign is a massive commitment of time and energy that if not applied will become evident in the outcome of the raise,” he said.
“We were fortunate to engage a social media specialist to ensure that our online presence and awareness was increased in the lead up to the launch and then continue to utilise their services throughout the offer period to raise awareness of the campaign.”
Wilson’s will use the funds as working capital for its expansion, improvements to its Albany operations and to invest in the sales and marketing team.
“Birchal provided a legal framework for the Offer Document however it requires a large marketing input on both the graphics and written information to be an effective form of communication to potential investors.
“Even if you feel you have a good handle on marketing your brand and product it would not hurt to allocate a spend on the production of the Offer Document.”
Your Mates Brewing Co.
The Sunshine Coast’s Your Mates closed its equity crowdfunding campaign on the Birchal platform last week, raising $2.5 million in record time from 1,015 investors.
Your Mates has recently announced expansion at its current site, snapping up the next door industrial site in a move which allows it to expand beer capacity from 1 million litres to a potential output of 10 million litres per year.
$2.5 million from its brewpub, and of its $4.7 million wholesale revenue, 72 per cent is carton revenue, the remainder in kegs.
“Our heads are still spinning after an absolutely mental response to our Crowdfund campaign going live,” the brewery said in a Facebook post.
According to the brewery, it now holds the record for fastest and largest raise for a craft brewery in Australia, raising $2.5 million in one hour and 14 minutes.
“We can’t wait for the next phase of our mateship journey, and now we have an extra 1,015 mates along for the ride. Sorry to the mates that missed out, but we still luv ya and look forward to sharing a cold one with you at our first open day,” Your Mates said.
Two Thumb Brewing Co.
Christchurch craft brewery Two Thumb launched on the Equitise platform in August and has officially closed the campaign, raising $906,900.