Exploring Crowdfunding as a Finance Model for Breweries

By Niels Burlund

Opening a new brewery is not exactly cheap. With nine out of 10 breweries operating at annual outputs of 2,500 barrels or less, those opening new breweries are looking for alternative finance models.

In a series of podcasts, the UVM Business of Craft Beer Program took a closer look at alternative finance models, starting with crowdfunding.

According to Gregory Dunkling, director of the Business of Craft Beer Program, crowdfunding is becoming an increasingly popular tool for breweries. Crowdfunding can help breweries with startup money, the purchase of new equipment, and with expansions of operations.

In the first podcast in the series, “Alternative Craft Beer Finance Models in Today’s Industry,’’ Dunkling spoke with Erik Lars Myers, owner and head brewer of Mystery Brewing Company, and Chris Meyers, vice president and co-founder of Crane Brewing, about how crowdfunding campaigns helped their breweries.

The Pitch to Raise Money

Mystery Brewing Company, located in Hillsborough, North Carolina, was one of the first breweries financed through Kickstarter in 2010. Erik heard about the concept from a friend and thought, “why not give it a try?” The campaign pitch—shot on low-budget video in his own home—netted 243 backers and $43,000.  While the crowdfunding campaign only provided about 6 percent of the total amount of funds raised, Erik said the experience was validating.

“It has been a really good base for growing the community, but really what it served to do was act as overall proof of concept so that I could find real money,” Erik says.

Crane Brewery, based in Raytown, Missouri, was financed through CrowdBrewed.com, a crowdfunding platform for craft brewers and industry affiliates. Chris noted that their crowdfunding campaign was focused on establishing a good-sized barrel aging program, but also allowed a variety of ways supporters could participate, big and small. They offered standard premiums such as t-shirts, glassware, and bottle openers—but also a unique reward: for $5,000 supporters could get to design and name a beer in collaboration with the brewery. (A local home brew shop claimed the reward, and the beer will soon hit the market.) The campaign successfully raised $45,000 from 300 individuals.

Another key to the campaign’s success was a reserve club: Members were given exclusive access to beers aged in barrels purchased in the campaign. “Those members are our best customers, because they feel a sense of ownership…they show up at our tours and say, ‘I made this,’” Chris says.

What works well are “experiences that you just can’t get anywhere else,” adds Erik, such as brewery dinners or exclusive access to the people behind the brewery.  “If you’re a beer fan, the last thing you need is another t-shirt.”

Creating a Successful Brewery Crowdfunding Campaign

While both Mystery Brewing Company and Crane Brewery received money through crowdfunding, the majority of their funding still came from traditional means. “It is a real capital-intensive business,” says Erik. “Crowdfunding can’t be your only option, and you can’t really use it as a start-up mechanism.” Instead, he recommends to “look at it for equity.”

Dunkling and the brewers agreed with CrowdBrewed.com’s “key ingredients” for a successful crowdfunding campaign, which include:

  • Spending time prior to launch building buzz and leveraging existing relationships
  • Providing high-quality, unique rewards
  • Staying active on social media throughout the course of the campaign

While the major financial burdens of opening a brewery still relies on traditional funding, crowdfunding offers both breweries and backers new and exciting opportunities. It’s a lot of work, the brewers agreed, but worth it.

Erik says, “The conventional wisdom is to triple what you think it’s going to cost, and double the amount of time you think it’s going to take.”

Listen to the full podcast

Learn more about the UVM Business of Craft Beer Program

-Niels Burlund is an undergraduate student majoring in International Business Communication and English at Aarhus University, Denmark. He is currently on exchange at the University of Vermont.

 

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