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The public way to raise finance

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There are now several Scottish examples of businesses using crowdfunding

IN business finance terms, crowdfunding is a fairly recent phenomenon.
The idea of coming up with a concept, then asking the general public to fund it, might have seemed far-fetched even 15 years ago.

• Crowded house: crowdfunding has served Brewdog’s James Watt and Martin Dickie well.

That all changed in 2009 when Scottish brewer and bars group Brewdog launched Equity for Punks.
The scheme, which sees beer fans invest in the firm in exchange for a range of perks including discounts on the company’s beers and invites to the group’s AGM party – in addition to their shares – has been a roaring success.

Speaking to SLTN in 2015 Brewdog co-founder James Watt said Equity for Punks was the ideal model for the firm, as it allowed the company to expand without compromising on its core principles.
“Most [finance] options for small companies inevitably lead to you having to compromise something about what you believe in,” he said.

“So if we got a parent company they might get us to cut costs or save money. If we got a venture capitalist they would have us hit investor targets, which means we would have to discount or push too far.
“With Equity for Punks our company is owned by the people who love our beers and care as much about the beers as we do, which means we can continue investing in our beers and our people and growing that way. That’s what makes Equity for Punks work for us.”
The first round of the project raised over £2 million. The fourth round, which closed in April 2016, raised £19m – breaking a world record in the process.

Supported by the Equity for Punks war-chest, Brewdog opened around 30 bars across the UK and another 17 overseas.
It was now undeniable that, for certain firms at least, crowdfunding had become a viable source of finance.
Brewdog remains the biggest success story of the crowdfunding model in the Scottish drinks industry, but it isn’t the only example of a business that has made it work.

The first round of Equity for Punks raised £2m. The fourth raised £19m.

In 2015 Bellfield Brewery, an Edinburgh brewer producing gluten-free beers, launched a campaign through crowdfunding website Crowdcube, which saw it raise £178,000.
The brewer launched a second round of crowdfunding last month.

Last year brewing and business development manager, Kieron Middleton, told SLTN that the unusual proposition of an entirely gluten-free brewery seemed to prove popular with investors.

“The funding came from 168 investors, who managed to put a fair bit of money in,” said Middleton.
“It capped out quite early and caught quite a lot of attention. The idea of a gluten-free brewery proved very popular and it was backed up with cash, which made starting this business a bit easier than some startups.”

And last year the team behind craft gin brand Pinkster launched a crowdfunding campaign on the Growthdeck platform, with aspirations to raise £600,000.
As of mid-March 2017, the campaign had raised £1m.

Most recently, another Scottish craft beer and bars firm, Innis & Gunn, recorded its own crowdfunding victory.
The firm, which operates three Beer Kitchen bars in Edinburgh, Dundee and St Andrews (with a fourth, in Glasgow, due to open in the near future) in addition to producing its well-established range of craft beers, announced the launch of a crowdfunding campaign in October last year.

Within three days of launch, the project had already achieved its goal of £1m.
A subsequent extension of the campaign has seen Innis & Gunn double its initial sum to £2.5m, which the company said will allow it to accelerate its growth plans and expand into England and North America.

It might not be effective for every business, but crowdfunding appears to have come of age in Scotland’s drinks and bars industry.

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