This week Ian Buxton explores how you can own a little bit of your own booze business through the magic of crowdfunding. You might even get in on the ground floor of the new Brewdog and get rich! But you probably won’t.
Did you get any Brewdog? Not pints of the eponymous beer but a bit of the company. The self-styled bad boys of brewing raised capital through crowdfunding. If you picked Brewdog as an investment in 2010 then well done – early backers saw huge returns. As James Watt, BrewDog’s co-founder, explained in 2017 when a US private equity company took a 22% share: “Shares purchased in Equity for Punks I are now worth 2,765 percent of their original value. Even craft beer fans that invested in Equity for Punks IV, which closed in April 2016, have seen the value of their shares increase by 177 percent in just one year.”
If you’d invested in Brewdog in 2010, you’d be rich. RICH!
Unlike schemes such as Kickstarter where your cash is effectively a pre-order for a product and you don’t own a share in the company, crowdfunding means you are buying equity and become a shareholder – a co-owner of the business.
Now, you can buy shares in the large publicly-quoted drinks businesses, such as Diageo. In fact, if you have any kind of formal pension fund you quite probably already do. But crowdfunding is different: it allows you to get in at an early stage of the development of a new company. It’s interesting, fun, and potentially more profitable than investing in a well-established company but – pay particular attention to this bit – carries considerable risk that you can lose all your money.
So why do it? Well, several reasons. You may know the founders or principals of the fledgling concern and be prepared to back their judgement; you might agree that they’ve spotted a genuine gap in the market; in the case of a community-based enterprise you might take an essentially philanthropic view or you might just fancy a flutter.
You’ve missed out on Brewdog but, on the basis that you’re reading this on a drinks site I’ll assume you’re interested in booze, so what opportunities are out there right now? I’ve taken a look at Seedrs.com, a UK crowdfunding site, and WeFunder.com based in the USA. Note that these sites operate by providing you with information on the company, funds to be raised, intended use of the cash and details on what percentage of the business is being offered. There will be a fundraising target and a date when the offer will close. Read all this information VERY carefully before you commit.
Burleighs gin raised over £100,000 through crowdfunding this year
No one can have missed the gin craze of the last few years. If you think it can carry on for a while yet, then £10 will buy you a piece of Burleighs Gin – they’ve already raised over £100,000 on Seedrs.com.
On the other hand, you might consider that gin is already a little passé and have heard of the hard seltzer boom in the USA. In that case, premium non-alcoholic and alcoholic seltzer brand Something & Nothing could be a good fit for your portfolio. Investment, also on Seedrs.com starts at £20, but one bold backer has already pledged £96,000 so evidently someone believes in the proposition.
Perhaps something on the huge US drinks scene will appeal. Turning to WeFunder.com there are a number of opportunities, ranging from flavoured malt beverage HoopTea (a $1,000 minimum commitment though) to Kokoro Spirits ($100 and up). Starting with Tequila it aims to build a “collection of premium spirits and a brand that celebrates communities and cultures from around the world”.
It’s always a good idea to spread your risk by diversifying investments. With that in mind, Drifter Spirits is creating a portfolio of craft spirits for the US market, starting with cachaça and aquavit brands. The company has been trading for some seven years with an experienced management team – $500 gets you a place on its share register.
There are many more opportunities arising on a regular basis and there are other crowdfunding sites. These are simply examples of an interesting new trend. Any of these companies could be the next Brewdog or all might crash and burn, taking your hard-earned with them. Caveat emptor!
IMPORTANT: Nothing in the foregoing constitutes investment advice or a recommendation. As with any investment consider the risk factors, do not invest more than you can afford to lose and seek appropriate professional advice. Disclosure: Ian Buxton may be an active investor in one or more of the businesses mentioned here.