March 13, 2014

Equity Crowdfunding: Food and Drink Deals in UK

While equity crowdfunding is slowly becoming a reality here in the U.S., this innovative financing model has been legal in the UK for past couple years.  To get a better idea of what we might expect here in the U.S. we recently did a back of the napkin analysis (no math majors here) of food and drink deals on UK crowdfunding platform Crowdcube. Crowdcube is one of the UK's leading equity platforms that allows everyday investors to invest in companies online.  The following chart provides snapshot of a typical successful food and drink deal on Crowdcube as reflected in U.S. dollars.  A few repeat deals by same company were not included.  

Deal Type

Avg. Raise

Avg.    Equity Offer

Avg. Valuation

Avg. Investment

Avg. Largest Investment

 Avg. #    Investors

Beer (6)

 

$148,452                    

 31.4%

$532,000

$1,918

$21,547

     93

Spirits(2)

 

$479,000

 32.5%

$1,818,000

$8,977

$120,000

     54

Food (11)

$425,500

 

 19%

$2,990,000

 

$5,073

 

$58,000

 

     84

Total Category (19)

$350,231

 

 23.7%

$2,152,000

 

$4,442

 

$66,000

 

     84

 

Please note that these numbers are shown for illustrative purposes only; any company raising money should seek independent advice on how to best structure a deal unique to that company. That being said, here are a few observations based on the data:

Food and Drink Popular Category

Food and drink is one of the most popular categories on Crowdcube, representing nearly 1/3 of the total deals on the site. In fact, a beer related company completed the fastest round on the site. While the average deal length is 45 days, craft beer subscription company BeerBods oversubcribed its initial target and closed within 36 hours.

Shareholder Rewards Important

Almost every deal included levels of shareholder rewards.  Depending on the amount invested, shareholders received perks such as free product, merchandise, recipe input, and lifetime discounts.

Mix of Class A and Class B Shares Offered

While a few companies only offered Class A shares with full voting rights, several companies chose to instead limit the offering to Class B shares with no voting rights.  Many companies offered both Class A and Class B, with Class A shares requiring a higher minimum investment.

Startups and Established Brands Participate

From a startup nano brewery and an expanding artisan bakery to an established restaurant group raising $1M to grow its operations, deals on Crowdcube demonstrate that equity crowdfunding appeals to food and drink makers of all sizes.  This suggests that growing companies view equity crowdfunding as a means for creating brand advocates.  While not on Crowdcube, Scottish brewer BrewDog epitomizes this point having turned 6000 customers into owners.

Big and Little Money Invest Side by Side

Kamm & Sons' spirits brand is an interesting example of how equity crowdfunding could attract a range of investors.  The Crowdcube campaign drew the attention of a syndicate investor group that ultimately invested $374k of the total $542k raise.  It will be interesting to see the extent to which accredited and non accredited investors participate together in deals here in the U.S. 



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