August 16, 2013

Crowdfunding Craft Beer and Food in Wisconsin

It's been an exciting week for investment crowdfunding.  This grassroots and democratic source of capital can only take off when the necessary securities exemptions are in place. Congress took the first step in April of 2012 when it carved out exemptions under the JOBS Act.  However, as the initial excitement has  been tempered somewhat by the rule-making process, states have begun to step in and create their own unique solutions.  Kansas and Georgia led the way and North Carolina and Washington are following suit.  This week, Wisconsin became the 5th state to pursue an intrastate exemption that would allow Wisconsin businesses to sell equity online to Wisconsin residents.  

We've been honored to play a role in the process and will continue to advocate the merits of the bill as it moves through the legislature.  CraftFund exists to help craft beer and food companies access the capital needed to grow.  We're particularly excited about the potential impact this could have on Wisconsin.

Investment Crowdfunding's Impact on Food and Beverage

It's our belief that consumer goods generally and beer and food in particular will benefit the most from investment crowdfunding.  With a strong social media following and passionate customers, beer and food companies are best positioned to leverage their online social capital to turn it into working capital.  Consumers with a buy local mindset are looking for opportunities to connect with and engage the farmers, brewers, and other local producers of their food and drink.  Investment crowdfunding could be the ultimate form of engagement they are looking for. Indeed, a look at the data in the UK--where equity crowdfunding is legal and thriving-- shows that food and beverage is one of the most popular categories for equity crowdfunding.  Scottish brewery BrewDog raised over £1 million within the first 24 hours of its latest online offering. Crowdcube, a leading UK crowdfunding platform, reports that food and beverage is its most popular segment.  Food and beverage has accounted for 18 of the platorm's successful 56 projects, raising over  £4 million.  

The potential for investment crowdfunding to expand the food and beverage industry in Wisconsin could benefit the state in two important ways.

1. Job Creation and Economic Growth

Food and beverage is a key driver of the Wisconsin economy.  As the top five food manufacturer overall, Wisconsin is one of the top producers of cheese, dairy, potatoes, sweet corn, and organic products.  Wisconsin is 8th in the country in breweries per capita.  The Wisconsin Restaurant Association estimates that the food and beverage category accounts for $7.3 billion in sales.  On the retail side, Wisconsin's restaurants are the top private sector employer in the state, employing over 250,000 people,   Therefore, it would serve Wisconsin well to support an initiative that gets some of its biggest job creators and revenue makers additional capital to grow and expand.

2. Placemaking

Communities are often built around local restaurants, pubs, bakeries, and breweries. Investment crowdfunding will allow Wisconsin residents to take charge of and shape their local communities through funding local establishments.  Imagine someone walking past a vacant store front in the community and wishing an entrepreneur would open a bakery.  At the same time, an aspiring baker has the same dream and a solid business plan to turn the vision into a reality.  Under the current rules and regulations, these two individuals might never discover each other.  Investment crowdfunding, on the other hand, will make it possible for the aspiring baker to broadcast her vision and business plan to the surrounding community.  If there's enough support, the community funds the bakery's opening.  The bakery is a success and creates more foot traffic in the area, which in turn draws more businesses and jobs to the surrounding neighborhood. What was once a run down area has now been transformed into a vibrant district.  And all of this was made possible through investment crowdfunding.  

Intrastate crowdfunding exemptions create additional avenues for beer and food companies to access new capital.  While we remain hopeful that federal regulations will soon be in place and prove workable, we're extremely excited about what's developing on the state level.

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