Crowdfunding - while generally unheard of a decade ago, is now firmly established within the accepted vernacular of investments not least because of a few notable and well-publicised success stories in the food and drink industry. A relatively simple concept, it allows investment to be raised in smaller increments from a large number of people for a specific project or venture. The investments being small, the risks to the investors are lowered, appealing to a completely new investment market.
Existing businesses, start-ups and individuals are increasingly looking for new methods to raise funds, moving away from the more traditional routes and lenders. According to a study by Massolution, the global crowdfunding industry grew by a heady 167% in 2014, with crowdfunding investments reaching around £26.6billion in 2016. Expectations are that crowdfunding will surpass the annual investments made by venture capitalists within the next few years.
Investors pledge a cash amount that suits their level of risk and in return are offered incentives- from as little as a public acknowledgement of their support on the business’s website, to discounts, products and in some cases even an equity stake in the business itself. Neither party is generally committed until a funding target is reached.
Successful crowdfunding has been particularly evident in the food and drink sector, where funds to establish a business or new product can be tight and operators are less attractive for investment by traditional lenders. A number of online crowdfunding platforms allow businesses to raise funds easily and relatively cheaply and the ability to choose the level of risk/ investment and broad appeal of an industry which is understandable to the general public, makes it attractive to newcomers to the investment market.
As well as producers, even restaurants and bars are getting into the crowdfunding game- raising funds for expansions into new sites and refurbishments in return for, most often, merchandise and future meals. Gary Usher of the Sticky Walnut in Chester is a good example of an operator who has used crowdfunding (coupled with a strong social media presence) to repeated success.
Of course, the most successful crowdfunding/ food and drink story has to be that of BrewDog- the craft beer company set up in 2007 in the north of Scotland. Riding (and definitely contributing towards) the craft beer wave, their online ‘equity for punks’ investments schemes have broken world records for equity crowdfunding and have moved them from a two man start-up into a well established global brand and thriving company.
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