May 17, 2013

The Future of Crowdfunding in the Craft Beer Industry

Rewards crowdfunding has taken off in the craft beer space with what seems like a new brewery campaign posted daily on Kickstarter.  The marriage of crowdfunding and craft beer makes sense in an industry that is dependent on customer engagement  Despite this, rewards crowdfunding's overall impact on the $10b industry has been relatively modest.  We believe that investment crowdfunding will play a much more significant role in the industry for two reasons:

Investment crowdfunding will attract more breweries. Crowdfunding has mostly been limited to breweries in planning to date.  That means that the 2400 or so established breweries--the ones with a robust and devoted social network-- have not capitalized on this form of grassroots financing and branding.  Whereas other existing businesses are beginning to use rewards crowdfunding to finance product development, breweries have not gone this route.  This is partly due to the nature of rewards crowdfunding.  While other businesses can use rewards crowdfunding test a new product or product market by offering sample products in return for donations, alcohol regulations make it very difficult for breweries to ship sample products in return for contributions.  Investment crowdfunding, however, will center on the online sale of equity to customers, an opportunity that any brewery can take advantage of.

Investment crowdfunding will attract more capital.  Because sample products are key to the rewards crowdfunding model, breweries are at a distinct disadvantage when it comes to attracting supporters.  Brewery rewards campaigns are left to offer gear (t shirts, pint glasses, bottle openers, etc) as well as the experience/satisfaction of contributing to a project people are passionate about.  Investment crowdfunding will blow this out of the water.  The same $100 rewards contribution that netted a pint glass and an experience of contributing to a cool idea, will now provide craft beer investors with a potential financial return and an ownership experience.  Seems like a no brainer.

Rewards crowdfunding will still be used by breweries in planning that are just getting in the game and need to broadcast their name/brand message. This is because it will cost money to conduct an investment crowdfunding raise, and the degree to which breweries can advertise the investment offer will be regulated.  Therefore, rewards crowdfunding might make more sense for those breweries in planning that approach crowdfunding primarily as a cost effective marketing tool.  Here's the landscape we envision once investment crowdfunding becomes legal:

  1. Breweries in planning attempting to get name out there: Rewards
  2. Publications, events and other campaigns with sample products: Rewards
  3. Breweries in planning with solid social media following: Investment
  4. Small/midsize breweries seeking capital to expand: Investment
  5. Regional breweries seeking to engage customers: Investment

There is a lot breweries and craft beer lovers can be doing while we wait on the JOBS Act.  If you are a startup brewery that wants to crowdfund now, check out our rewards platform.  If you are a brewery or craft beer lover interested in investment crowdfunding once it becomes legal, get connected and join our growing community while we wait for the final regulations.  

Comments

  • Josh E.

    Your theory on providing returns for the donator (or now investor) is a great idea. Sometimes I feel like some breweries on Kickstarter are sort of like those well known bands that ask for $10,000 to fund a new record. Some breweries do the rewards system pretty well- Modern Times did their rewards system pretty well - http://cwhighlights.com/modern-times-beer-kickstarter/#axzz2UbWBttJz But others, well, sort of freeload.


    May 29, 2013 at 1:10PM CST

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