Big Alice Brewing's Robby Crafton and Kyle Hurst got started, as many in the industry do, as home brewers. But they were thirsty for more—a better space, equipment, and a regular brew schedule. They also had also a very practical problem: what to do with all that beer. “We were making this beer and we were happy doing it. But we also ended up with all this beer and we couldn't necessarily drink all of it ourselves. Or we shouldn't, we were told,” said Crafton.
The two decided to open a brewery. “We drew up a business plan—real basic crunch the numbers—and realized that it was a horrible idea,” said Hurst, adding, “Especially at this size and our capacity. It made no sense at all.”
Even before they had product to sell, they would have to fund months of rent, ingredients and other costs. To solve this problem, Crafton and Hurst decided to sell "beer shares." Instead of equity in the company, each $200 share comes with two, 750-milliliter bottles each month for six months. It’s an ever changing variety from “Biscuit & Buckwheat Honey” to “Amber Ale with Basil.”
The idea was inspired by community-supported agriculture, where several individuals commit to buying portions of local farmers' harvests and pay up front.
Crafton and Hurst sold out of their first offering of 90 shares, selling to friends, family and the wider craft brew loving community. They raised $18,000 and opened their brewery in Long Island City, New York in June.
Julia Herz, craft beer program director for the Brewers Association, said these community-based fundraising initiatives are a good fit for upstart breweries. “They're small, they're smart. They’re savvy. They’re scrappy. They are going to do what it takes to get those dollars in many, many different ways.”
That includes turning to crowdfunding websites like Fundable and Indiegogo. Both sites say they've seen an influx of brewers seeking funding through their platforms.
Ask Gary Humble, president of Grapevine Craft Brewery, how crowdfunding has helped his company. He hoped to raise $50,000 through Fundable to move his operations into a new building in downtown Grapevine, Texas. Those who pledged money to his two-month long campaign would be rewarded with everything from swag to free beer for life. He didn't just meet his goal, he exceeded it--raising over $61,000. “I don't want to say that we were shocked because we knew we had a lot of community support,” said Humble. “But we were also kind of shocked and overwhelmed of the kind of support we actually got.”
The money raised through Fundable allowed Humble to set aside five percent of the brewery's future profits to donate to charity. That was a big selling point for Grapevine Craft Brewery's top sponsor, Troy Morgan, who donated $10,000. “I am actually what's called a community owner, which basically means that I am responsible for helping them give back to the community. I don't actually take any equity in the company,” said Morgan.
He also gets his company's name—PanTech Design—on one of the vats and the opportunity to work with Grapevine's brewer to design a co-branded beer. The personal perks aren't half bad either. “Yes it is fortunate that I've been given free beer for life,” laughed Morgan.
But there are a few downsides to these kinds of fund raising schemes. On several of the crowdfunding websites, if you don't meet your goal, you don't get the funds. But even a failed campaign can serve as a market focus group for budding businesses. “If you're not able to raise the funds there, that might be telling you that you're not tapping the right people, or the actual spot that you've chosen or business model that you've chosen needs to be adjusted,” said Herz.
The New Brewer magazine estimates there are now more than 450 crowdfunding sites for upstart brewers to try including a few devoted specifically to the craft beer industry like CrowdBrewed.