Read Time: 5 minutes
Since funding started in May, the adult beverage industry has seen the biggest cumulative amount of investment dollars. Alcohol, along with other heavily regulated industries, haven’t had this type of success with traditional crowdfunding, which makes us wonder why equity is changing that narrative.
The Backstory on Investing in Alcohol
As the mainstream focuses on the rise of the cannabis culture, I keep trying to figure out why I never had the foresight to invest in alcohol. In college, drinking games were the necessary tool to improve awkward social interactions, and craft beer signaled an increase in income and maturity, even if both weren’t true.
In the past 5 years, several players in the alcohol industry have seen steady growth. While bigger brands still have the leg up in market share, smaller breweries played an important role in the movement. Since 2010, microbreweries have seen an exponential growth that correlates directly with the rise in stock prices for large distributors. The Brewer’s association counted 3,739 breweries in 2015, which was 2x the number of breweries since 2010. They also forecasted 2016 may set the mark for the largest number of local breweries since the 19th century.
Getting to the Dilemma
Crowdfunding platforms, like Kickstarter and Indiegogo, launched around the same time craft brewing started to grow. The platforms promoted funding creative individuals who wanted to build something great, but needed donations to help kickstart their business. At a cursory glance, craft breweries should have been gangbusters within the model. They touted creative self-starters, a new product that disrupted a big industry, and a growing devout fan base.
So, what was the catch?
Breweries were allowed to raise money on the platform, but they didn’t have the opportunity to offer their products. While traditional crowdfunding was set up to be a donation based platform, many users backed projects in hopes of receiving something in return. That’s evident based on the fact that Kickstarter had to deliver this message to its users back in 2012, asking them to stop using Kickstarter as a store.
From UnderDog to Fan Favorite
The alcohol industry may have been the underdog with traditional crowdfunding, but local breweries are showing that the story may be different with equity crowdfunding. Leaning on the strength of their continuously growing communities, brewers are leveraging equity, instead of product, to entice potential backers.
The equity play helps attract beer loving fans, and creates a sort of grassroots marketing campaign for the business. Backers who want to see their investment to succeed will make it a priority to entice friends, family, and coworkers to the business. That marketing tie in seems to be working, as beer, wine, and spirits have raised over $1,000,000 in 60 days.
If anything, platforms should be ecstatic for the small win. It may not be headline news, but it’s a start in the right direction for this new crowdfunding model. Now the question stands of whether other small brewers will follow suit, and whether equity crowdfunding may have found its niche. Only time will tell, but we’ll sit back, crack open a beer, and quietly celebrate a small milestone.
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