A New Way Of Crowdfunding


“Would You Pay $1,000 Once to Get Free Beer for Life?”

A brewpub and a coffee shop in Minnesota’s Twin Cities have successfully used this one-time payment method – a crowdfunding campaign with a twist. Is it the new model to follow for bars and restaurants?

Northbound: free beer for life for investing in a small restaurant with home-brewed beer

In 2012, in order to secure a bank loan and make their dream of opening a restaurant that served beer brewed right there at the pub come true, Amy Johnson and her business partners had to raise 220,000 dollars. The only investors they found, who offered to invest for a voting share in the restaurant, had no experience in the restaurant industry, and thus Amy and her partners decided to go on another path.

The idea came from friends and family who wanted to help out, but couldn’t alone. “They were, like, ‘I’ve got a few grand, but I don’t have too much money,” Johnson recalls. As many people were telling them that, they decided to make this step. “Why not just take a couple grand from everybody and then we’d have all the money we’d need?”

Investors were given three options. Those who invested $1,000 received free in-house beer for the rest of their lives, or as long as the place stays open. Alternatively, investors could also receive 0.1% nonvoting equity in the company for every $1,000 invested. Or for $5,000, they get free in-house beer for life and 0.5% equity. The brewpub, now a registered limited liability company, reached its goal of $220,000 through 46 people that chose the first option, 42 that picked the second, and 30 that took the third. All found out about the opportunity via word of mouth. Clearly: this is a crowdfunding campaign, with a twist. Platforms such as Kickstarter don’t allow alcohol as a reward for investment, and thus the traditional way of crowdfunding it useless for a restaurant where the greatest allure is in-house beer.

Even though unlimited free beer for a lifetime is certainly worth more than $1,000, Northbound has been thriving since its opening. On average, the restaurant is giving away 17 beers a day, and the cost is low, at just 40 cents a beer. In addition, investors aren’t visiting the brewpub only for a beer by themselves – they bring people, order food, or maybe drink other things than beer. Further, it’s also about a sense of ownership for these people: Northbound has over a hundred brand ambassadors.

Groundswell

Groundswell used to be small a coffee shop which was making losses. The owners, Tim Gilbert and his partner realized that in order to turn profitable, a major transformation was required. They decided to create a complete menu – with food made from scratch, with a beer and wine license – and to take over more of their building, for which they needed to raise $55,000. Now Groundswell is operating in three times the space and earning eight times the daily profit. This all happened in one year, and all the support came from 75 people willing to invest $1,000 on the transformation of the coffee shop.

Groundswell saw the Northbound model working out for the brewpub and decided to follow suit, but with its own twist. Considering the extra costs for beer without brewing beer in-house, the same model wouldn’t have been viable for them. Thus, instead of free beer for life and equity, investors were offered $1,000 for one beer, glass of wine, or cup of coffee per day for the rest of their lives, or as long as the place stays open. For $500, the deal lasted two years; for $250, for a year.

The modified model also worked out perfectly. Before the transformation, Groundswell was making $200 a day. Now it makes $2,400 a day.

Apparently, the places offers have worked for the same reason why crowdfunding projects do. However, there is an important point of difference: these projects were not __ in an online setting and did not target the general public. Instead, they specifically targeted family, friends, and those living in the neighborhood. It is intriguing to see how mechanisms that the internet brought about can work in a traditional setting. And it is pointing at probably how things could be made different in our arms’ reach.

http://www.nationaljournal.com/next-economy/solutions-bank/would-you-pay-1-000-once-to-get-free-beer-for-life-20140529

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