Why crowdfunding works so well for craft beer brewers

Why crowdfunding works well for craft beer brewers

Crowdfunding is a proven and popular way for craft beer brewers to raise money to expand or accelerate growth, or even to start in the first place. It is also a popular way for many thousands of beer drinkers to be able to say “I own part of a brewery.” Here is what I consider to be the key factors.

Funding sources for craft beer brewers

Crowdfunding is popular with craft beer brewers because there are few barriers to using it, beyond the hard work it involves. And many brewers already have a crowd of buyers and drinkers to appeal to who consume their products on a regular basis.

Bank and P2P loans are restricted to businesses that are already trading, with an income and a future order book that looks solid enough to make the repayments. An existing brewer may be able to secure a bank loan, but a new startup won’t. Banks also require guarantees against loans, and if a brewery goes bust its owners will still be liable for the debt. That’s not a comfortable feeling.

As for VCs, the craft beer sector is very fragmented with many small players. From 2018 to 2022 the number of UK brewers grew from 1,489 to 2,426.

Number of breweries in the UK from 2018 to 2022

Graph showing the number of UK breweries

             Source: © Statista 2023

Organic growth is typically slow. It can be difficult to scale fast as it is the antithesis of being a craft product. An exit strategy of an eventual sale to a big drinks company would be difficult to achieve as they have already had their pick of the crop. The Budweiser owner, AB InBev, acquired Camden Brewery; SABMiller purchased Meantime, which was local to me in Greenwich, south east London; Carlsberg took over London Fields; and Heineken acquired Beavertown, founded by Logan Plant, son of the former Led Zeppelin vocalist Robert Plant.

As well as limited opportunities to scale, many of the newcomers seeking funding don’t want to raise enough money for VCs to even consider them in the first place.

Crowdfunding is flexible

During Covid, several brewers turned to reward-based crowdfunding to ask customers for their support. Pre-Covid, the Manchester Union Brewery had relied on keg sales in on-trade outlets. When lockdown closed the pubs, they asked their community for donations to install a canning line that would enable them to switch to online orders for home delivery. Incentives to support their appeal included discounts off future purchases, shorter waiting times for deliveries, and inclusion on a “Wall of Honour.” It raised £46,141 from 617 supporters in 64 days.

This method of crowdfunding continues to be used by breweries to raise money to build or expand taprooms (which are on-site public bars). As an example, in March 2021, the Skinners Brewery in Cornwall raised £152,301 from 2,449 supporters in 28 days to build an outdoor drinking area at its site in Truro. Perks for donors included beer vouchers, tickets to exclusive events, branded merchandise and online sales discounts.

Skinners Brewery in Cornwall raised money through crowdfunding to build its outdoor drinking area

Bringing forward demand to generate pre-payment by offering beer vouchers can ease short-term cashflow issues, but has to be carefully judged so that those issues aren’t merely delayed until another time.

Many startup breweries offer shares in the business through equity crowdfunding. One running in November 2023 was Signature Brew, whose business model is to brew collaboration beers with bands and musicians. Founder and CEO Tom Bott had exceeded the £700,007 target for 4.59% equity by +25% with a few days left before the round closed.

Crowdfunding is popular with startups, but not it’s exclusively for startups. Exmoor Ales was established in 1980, and in March 2024 it closed a crowdfunding round that had raised £330,048 from 329 investors. Perks for investors included the standard branded merchandise, discounts on online orders, and a limited amount of free beer for life for larger investors as long as they remained a shareholder.

Good crowdfunding is good marketing

Running a crowdfunding campaign can generate significant media coverage and social media buzz. It serves as a marketing tool, creating awareness about a brewery and its products. This increased visibility can attract not only backers but also potential customers.

In 2023, the southeast London Gipsy Hill Brewery brewed the first carbon-negative beer without using offsets. In October ’23 they began a round of equity crowdfunding and announced their aim to be the world’s first carbon-negative brewery by 2030. The crowdfunding raised awareness of the brewery’s carbon reduction accomplishments to date and future aims. The founder and CEO was interviewed by the Sunday Times, and a television station camera crew turned up to film him at the brewery.

Crowdfunding empowers consumers

Benefits for backers

The most commonly hoped for outcome from investing in an equity crowdfunding campaign is a good return on investment. The founder of Camden Town Brewery, Jasper Cuppaidge, used equity crowdfunding in 2015 to raise £2,749,860 to build his own brewery in London. The amount of equity this involved meant the brewery was valued at around £50 million. Eight months later, having come to its attention, and seeing the extent of its public support (good crowdfunding = good marketing), AB InBev bought Camden Town Brewery for an estimated £85 million. In under a year, the 2,172 crowdfunding investors had secured a 70% return.

Successful crowdfunding does not always mean that a brewery will go on to achieve long-term commercial success. There is a risk. After 25 years the Skinners Brewery in Cornwall was forced to close in October 2022, despite its new outdoor venue paid for with crowdfunded donations.

However, small-scale investors know that a low entry cost to buy some shares can be recovered through using the online discounts that are often offered as perks. When they have saved enough money it effectively means they have reached a breakeven point and become a shareholder at no cost.

When businesses are registered under the HMRC’s EIS and SEIS schemes, crowdfunding investors who are UK taxpayers can reclaim from 30% to 50% of their initial investment. Any eventual return on investment is outside of Capital Gains Tax, or if the business sadly fails then even more of the initial investment can be reclaimed through the taxman.

Beyond ROI, sociable investors like to meet like-minded people at investor events, and can visit a brewery’s taproom bar at any other time to seek out kindred spirits.

Some investors like to invest in several breweries to create an annual schedule of perks of free or at least subsidised beer deliveries at home.

And of course there is the opportunity to drop “I’m a part owner of a brewery” into conversations.

Non-monetary benefits of a brewery having a crowd of backers

Crowdfunding is not just about raising money; it’s about helping to build a community around a brand or a business.

New crowdfunding research findings reveal that crowdfunding backers enjoy a sense of deciding which companies and products will make it to the marketplace. It gives them a tenuous link to the buzz of entrepreneurship with little personal risk – depending on the size of their investments.

I believe it’s then reasonable to consider that having contributed to the existence of a brewery, its new brewing equipment and premises, or a taproom, the crowdfunding backers will be very loyal.

Regular visitors to a brewery taproom can be encouraged to try limited quantities of new beers and give their feedback. Or packaged products could be delivered to crowdfunding backers at home. This form of product validation helps decide which new beers to take to full production.

Brewery supporters, whether investors or donors, can also be very useful as brand advocates. They can give word-of-mouth support and encourage friends and colleagues to try a brewery’s products. They may be able to provide vital business connections and make introductions, and also personally offer to provide a range of services from accountancy and legal advice to decorating offices and servicing vehicles.

To summarise, beer is a product that relationships can be built around, rather than simply regard an investment through crowdfunding as a transaction. Anyone who leaves it at just taking the money is missing a trick or two.

Crowdfunding’s popular for food and drink brands and restaurants

Food and drink crowdfunding examples October 2023

Of the crowdfunding campaigns and related news I noticed in October there was a high proportion that were food related. This includes startup food brands and restaurants. Entrepreneurs and startup founders in these sectors have identified that as well as raising funds to invest in the business, well planned and executed crowdfunding also represents good marketing.

Crowdfunding for food and drinks brands can stimulate trial, prompt consumers to ask for them in their local outlets, and increase brand loyalty among existing users who can become investors. New shareholders can also become valuable customers in a virtuous circle that gives crowdfunding backers a strong motivation to become brand advocates and ambassadors.

Similarly, crowdfunding used by restaurants can bring forward consumer demand and have them pay now for meals they will enjoy at a later date. From burger and coffee chains to Michelin-starred restaurants, it provides customers with a talking point to recommend a favourite place to go to friends and colleagues. Perks such as limited places for cookery lessons, or even meals prepared by chefs in crowdfunding backers’ own homes can deliver a wow-factor to make the backers feel special, and once again give them a talking point.

Crowdfunding backers also have the chance to get to know about the people behind startup food and drink brands, and restaurants, and maybe identify with their broader aims from an increasingly ESG or community asset perspective.

Crowdfunding by Restaurants

Chefs Lewis Dwyer and Andy Aston opened their independent Michelin Star restaurant called Hiraeth in Cowbridge, Wales, last November after raising £30,000 of reward-based donations through crowdfunding. They now need new premises after the landlord unexpectedly decided to sell the property.

Chef Merlin Labron-Johnson had already beaten his £125,000 crowdfunding target with 10 days left to run. He was raising money to relocate his farm-to-table restaurant Osip 2.0 in Somerset. His crowdfunding went on to achieve £166,261 from 464 backers to help bring this project to life. As perks, he offered branded restaurant crockery, chocolate cookie tasting sessions, hampers of mixed goodies, lunch and dinner at the restaurant for groups up to eight people, and home cooked meal for fifteen, and tickets for an exclusive opening night party.

Equity crowdfunding by London-based Honest Burgers’ closed after raising almost £3m. The casual dining restaurant group soundly beat its £1m target, raising £2,905,631 from 3,456 investors. It will now open further restaurants and launch a new quick-service burger.

Founded in Barcelona in 2020, startup coffee chain GoodNews is soon launching a round of equity crowdfunding after three previous seed and Series A funding rounds, which have already raised €15m (£13m). Good crowdfunding can be good marketing and attract loyal customers.

Startup founders Florin Grama and Felix Ortona Coles met while working at St Barts restaurant in London’s Smithfield Market area. In October they began reward-based crowdfunding to raise £20,000 for the final pieces of equipment they needed to open their Tarn Bakery in Highgate. Perks include classes to make croissants, sourdough pastry and pasta. By October 29 they had reached £15,242 with eight days left to run.

Crowdfunding by food and drink startups

With the growing demand for minimally processed and natural plant-based food, Tempeh brand Better Nature has launched another round of equity crowdfunding as part of a £1 million-plus raise to drive retail growth for its meat alternative range across the UK and Europe.

Hertfordshire-based SRSLY Low Carb has signed an agreement with a food distributor that services leading supermarket chains in all 50 US states. To support global growth, SRSLY is embarking on a seven-figure equity investment round which includes a round of equity crowdfunding in November with a minimum target of £500,000.

Earlier this year, craft beer maker Gipsy Hill Brewing in southeast London launched the world’s first carbon-negative beers, achieved without relying on carbon offsets. A new crowdfunding campaign in November will help them accelerate their climate-positive agenda. The brewery ran its first equity investment round in 2022, in which 581 investors joined its community and invested £865,149, 130% above Gipsy Hill’s target.

A former City analyst founded the Cheesegeek food marketplace platform in 2017 to connect artisan cheesemakers with consumers. Edward Hancock now hopes his equity crowdfunding campaign in November 2023 will raise £150,000 so he can start a forum for cheese fans, with investors invited to develop a new variety.

French plant-based food brand La Vie closed its equity crowdfunding in October with 2,691 backers investing €2.1 million. La Vie, whose UK headquarters are in London, used the Crowdcube platform which through its Barcelona office is authorised to run crowdfunding campaigns throughout the EU as well as in the UK. La Vie’s multi-award-winning plant-based alternative to bacon is available in 13 European countries. The brand claims to have so far saved over 90,000 pigs and 2 million tonnes of CO2.

Considering crowdfunding?

If you are thinking about running crowdfunding, and in any sector, not just crowdfunding for food brands, the most common mistake is to not allow enough time for preparatory work. This can include building larger networks of followers, and for those considering equity crowdfunding the platforms will require you to have lead investors prepared to guarantee a minimum of 30% of your target raise.

I am an independent crowdfunding strategist and adviser, unattached to any particular crowdfunding platforms. Please get in touch for objective advice and insights into your plans, and maybe hands-on support if you decide you want it. Send an email to [email protected] to get started.

A Snapshot of Small Business Crowdfunding Projects

Examples of small businesses using crowdfunding

Crowdfunding’s a great way for small business owners to raise alternative funding that’s usually not enough for VCs to be interested. An article published in September 2023 by Small Business Trends gave an overview of five types of crowdfunding, plus five benefits that crowdfunding delivers.

Crowdfunding can certainly do more than just raise money for a business, and here are more than five benefits.

  • Crowdfunding can provide social proof and product validation to show that startup business founders are going in the right direction.
  • It can also be used by existing businesses of any age to develop new products and expand.
  • Early crowdfunding backers can provide valuable feedback as a business tries to fit all the pieces of a jigsaw together to achieve success.
  • Early backers can also become brand advocates in a virtuous circle that allows customers to become investors and investors can become important customers.
  • Pre-orders can de-risk the first production run of a new product, and even multi-national companies including Sony, Coca-Cola and Mattel have used crowdfunding to test consumer demand. 
  • Crowdfunding is very flexible and not only for consumer-facing businesses. Although it’s not exactly small these days, B2B mineral extraction company Cornish Lithium has just closed a crowdfunding round having raised £5.1m.
  • Whatever type of business you have, a well planned and executed crowdfunding campaign also provides great marketing support to build awareness of a business and attract interest. Get in touch if you want to discuss your ideas.
  • Crowdfunding opportunities can also appeal to everyday retail investors who choose to support companies that are active in certain specialist business sectors.

Fashion

Recycled clothing is becoming more and more popular as awareness grows of the amount of waste in the fashion and clothing industry. Immaculate Vegan is an upmarket vegan and sustainable fashion platform. Encouraged by 56% year-on-year sales growth, it launched an equity crowdfunding campaign that closes/closed on September 26. Its target was £200,000 – it reached over £300,000 from more than 300 investors.

Cycling

There have been many successful small business crowdfunding projects in the cycling sector. I guess they appeal to people who want to invest in businesses that may help get people out of cars and tackle air pollution.

Two years ago, the Smart Tyre Company startup in Ohio, USA, developed an airless tyre for road bikes in partnership with NASA. They claim they have both the elasticity of rubber and the strength of titanium, and made them available through crowdfunding on Kickstarter. With 16 days to go at the time of writing, almost 300 backers had pledged just short of £125,000 to order a set of the innovative bike tyres.

Scottish startup Intra Drive is also using equity crowdfunding, through Crowdcube, to help bring its new 8-speed mid-drive for e-bikes to market. The redesigned e-bike motor comes with enhanced efficiency that simplifies manufacturing; a lighter gearbox; integrated electronics; an innovative display interface; and it is easier for manufacturers and consumers alike to fit it.

Healthtech

Healthtech startup AudioTelligence launched a crowdfunding campaign for its hearing enhancement device. Having decided to go-it-alone rather than sell out to an established rival, their small business crowdfunding goal is £400,000 to fund the manufacture of an initial batch of 1,000 units. Feedback from these early backers will be very valuable to aid product development.

Sport

The company that owns both the Cornish Pirates rugby club and Truro City football club in Cornwall, Kernow Sport, has raised over £413,000 from nearly 500 investors by offering equity through crowdfunding. It’s the first stage of raising a £2.5m total as the main benefactor begins to wind down his personal investment in the two clubs, reported the BBC.

Small bsuiness crowdfunding can support sports clubs like the Cornish Pirate rugby team

Community-based projects

The legendary Filmhouse Cinema in Edinburgh is raising the first £250,000 of a total £1.25m needed to re-open with a 21 year lease in its existing building which is being refurbished.

By September 17, a 2021 Masterchef contestant was over 80% of the way to raising £35,000 through reward-based small business crowdfunding to help him open a new restaurant in Bishop Auckland, northeast England.

Proptech

Small buiness crowdfunding helps raise smaller sums than VCs are interested in

HouseStars is an AI-powered app that connects property owners with building trades people. It is 98% of the way to its £125,001 equity crowdfunding target on Seedrs. As at September 25 there were 23 days left to run. SEIS investor benefits are available, which for taxpayers include a rebate through the tax system of 50% of the amount invested.

Food and beverages

World Tea News reported that New York-based Leaves of Leisure, a luxury herbal tea brand with a focus on zero and low caffeine teas, has launched a crowdfunding campaign aimed at growing the brand and expanding into new markets. CEO and Founder Allison Ullo hopes to raise $50,000.

Crowdfunding, through offering equity or bringing new products to market, is definitely a strong option for many small businesses with big ambitions. I am an independent crowdfunding adviser, with no ties to any particular platforms. Whatever sector you work in, crowdfunding is very flexible and could play a role to help turn your innovation and dreams in to life-changing reality. If you’d like an objective assessment of how crowdfunding could provide a solution for you, and how close you are to being ready to use it, then please get in touch. Send a message to [email protected].

Building Sound Foundations for a Startup Through Crowdfunding

Louis Timpany, founder and CEO of Fix Radio

I was fortunate to meet recently the founder and CEO of the startup Fix Radio station. Louis Timpany did some building site work as a student and experienced the building trade’s love affair with the radio. He listened to their gripes and grumbles about what was on offer, and then set about creating a different type of startup commercial radio station that better suited their listening habits – sometimes all day, most days – and also championed their causes. He then had to set about monetising it to build a secure future for his niche radio station which is outside the established pattern of how a commercial radio station operates these days. Louis turned to equity crowdfunding.

After starting with a regional presence based around London and Manchester, in 2022 the station was granted a national digital licence. Since then its listening audience size has grown by nearly 250%, and national advertisers including B&Q have recognised the Fix Radio station’s ability to deliver a key advertising audience with low wasteage.

The station also gets behind what matters to the building trade. Such as the grim statistic that men who work in construction have the highest suicide rate of any industry sector in the UK. The seemingly never-ending introduction of one-way roads and width restrictions make life more difficult for builders – and their clients. Post-Brexit immigration rules are exacerbating the construction sector’s skills shortages, and escalating fuel and building material prices mean it’s harder to manage costs and make adequate profit.

For those of you that know me, I spent a couple of summers as a student preparing for each September’s new rugby season by working for a local builder, and later I spent six very rewarding years working at the generic marketing body for the UK commercial radio industry. There was a certain inevitability that I would sign up to Fix Radio when I came across their crowdfunding campaign in 2022, and I was one of nearly 350 investors who backed the station with over £950,000.

The funds allowed Louis Timpany to scaleup his startup radio station by expanding his team; run promotional events across the country to build awareness among potential listeners and commercial supporters; and sign up to industry acceptable audience measurement research. Naturally I wish Louis and his team great success!

If you have a startup business and are thinking about how to raise a budget to accelerate growth, please get in touch to discuss whether crowdfunding is going to be appropriate for you. I will provide you with independent crowdfunding advice and set out a seven-stage appraisal to get you ready.

5 Reasons for Equity Crowdfunding Success

equity crowdfunding success for a doughnut company

Many startups using crowdfunding offer techie apps or fintech products and services, but it was a Midlands-based doughnut company that recently enjoyed phenomenal equity crowdfunding success.

The Project D doughnut company, set up in 2018 by three former schoolmates, launched an equity crowdfunding campaign in May 2023 to raise £400,000 and accelerate the company’s growth. It already had an annual turnover of £2.6m prior to the crowdfunding, and had set an aim to reach £12 million in three years. They were staggered to receive, in just a preliminary private investment round, pledges of £2 million. This was before it was even open to the general public. They used the Crowdcube platform, which is a major one for equity crowdfunding offers in the UK.

The three founders were left wondering how to respond: how much added equity would they open up to crowdfunding investors? Some people may think they should just take the full £2m on offer from investors in the private round, and then go ahead and generate even more from the public round. However, given the high demand for their equity, they could scale back now and possibly come back soon with another round at a higher share price.

Equity crowdfunding success like this is great to see, though it doesn’t happen very often to this degree. And it does also present some problems. I began to think about what the reasons or the circumstances were that caused this surge of popularity. Five factors came to mind.

1. Project D has a low-entry-cost product that significant numbers of customers have been able to try, and evidently decided they like the doughnuts and the way the company operates its D2C order-taking and delivery. They have a substantial community of over one million people to attract as investors. They had obviously done some good data capture work to be able to communicate the crowdfunding offer to them.

2. A lead investor had guaranteed £150,000 – 37.5% of the initial £400,000 target. That gives smaller investors confidence to go ahead.

3. The business had used social media very cleverly to raise brand awareness, with viral videos on its Tiktok account receiving 19 million views in a single two-month period.

4. Project D can claim corporate accounts with British Airways, Brewdog, Amazon and Rolls-Royce. It might have been no more than a delivery to a local office, but big brand names add cachet and boost investor confidence.

5. The company has also won multiple awards including being named the first-ever winner of the Online Bakery Business of the Year category at the 2022 Baking Industry Awards.

To investors, it must have looked like a tasty winner all the way! There are lessons here for all sorts of companies in many different sectors about customer data capture, effective marketing, the value of corporate accounts and the reputational benefits of entering and winning awards.

If you are considering running a business-related crowdfunding project, and want to discuss it with an independent crowdfunding adviser, then please get in touch by an email to [email protected]. To keep up with crowdfunding news, events and projects you can follow me on Twitter.

How do you balance crowdfunding risks and returns?

Crowdfunding risks and returns follow the same rules as any other investment. Higher returns mean exposing money to more risk. This is certainly true in crowdfunding, whether you want to raise money for your business or on a personal basis. I wrote an article for my client BOLD Awards on this topic, which looks at the risks and returns involved in reward, debt, and equity crowdfunding. I included some examples, plus a little personal experience.

Debt crowdfunding platforms, also known as peer-to-peer lenders, generally experience an average default rate of 1 to 10%. Equity crowdfunding mainly, though not exclusively, involves backing startup businesses. On average, 50% of them fail in their first three years, and only 1 in 10 succeeds beyond ten years. Investors seek higher returns from buying equity than from providing capital for loans.

Reward-based crowdfunding, which does not involve buying equity in or lending to a startup, carries its own risks. It swiftly developed from rewarding backers with a gesture of appreciation for a donation to a project or an appeal. In many instances it has become a quasi-sales channel where the donation is effectively the purchase price of a product, and the product happens to be the reward that is provided. Even though this may sound like a straightforward transactional arrangement, it can carry risks if the product on offer is still in the development stage. It is definitely not the same in timescale or consumer protection as ordering an item from Amazon.

The rest of the article goes through the balance of crowdfunding risk and return for each of reward-based crowdfunding; debt crowdfunding (aka peer-to-peer lending): equity crowdfunding; and crowdfunding to buy fractionalised ownership of tangible assets, such as art, luxury cars and watches, rare whisky, and so on. It is over at the Bold Awards site, please use this link to continue reading: https://bold-awards.com/crowdfunding-risks-and-returns/

Secondary Market Adds Liquidity To Equity Crowdfunding

It’s been a pleasure to spend time in 2022 working with the CrowdInvest equity crowdfunding platform. Headquartered in London, it’s a cross-border startup investment platform with a mission to connect investors from developed markets with startups from growth markets. A key objective is to accelerate the growth of businesses concerned with environmental or social impact outcomes. They will also operate an equity crowdfunding secondary market for shares bought through the platform.

Their initial spotlight will be on the UK-India corridor and then expand to include emerging economies in southeast Asia, Africa and the Middle East. CrowdInvest will pay particular attention to nurturing founders from less privileged backgrounds to generate inclusive, sustainable economic growth. Their transparent application process and due diligence procedures have no gender bias.

I recently wrote an article for them about the growth of secondary markets for shares bought through equity crowdfunding. Buying equity in a privately-owned business through crowdfunding is always risky, and in the early days it was also an illiquid investment. No matter how circumstances changed for any individual investor, their money was going to remain off-limits until the business they invested in exited by completing either a trade sale or an IPO. 

The growth of equity crowdfunding secondary markets in privately-owned businesses has subsequently developed in the past few years for two main reasons:

  • Improved liquidity makes investing in startups through equity crowdfunding platforms more appealing.
  • To make secondary buying and selling a larger income stream for the crowdfunding platforms.

The growth of the secondary market has also attracted other non-crowdfunding fintech platforms. To read the full article please head over to https://bit.ly/GrowthOfSecondaryMarkets.

You can join the CrowdInvest waitlist today at https://www.crowdinvest.com/ to stay up to date with developments on how to be involved, either investing in startups from emerging economies or in the platform itself.

New UK Crowdfunding Platform CrowdInvest Will Offer Equity in Indian Startups

Clive Reffell's interview of Nakul Garg, co-founder of crowdfunding platform CrowdInvest

Since January 2022 I have written numerous articles for what is going to be a new equity crowdfunding platform in the UK, called CrowdInvest. Its unique market position is that it will offer UK investors opportunities to buy shares in tech startups that operate primarily in India, which is the world’s third largest startup ecosystem. With a population approaching 1.4 billion, startups in India can seriously scaleup without the added complexities of developing or servicing a market in other countries.

CrowdInvest is a group entity of Red Ribbon Asset Management Plc, an Indo-British investment company established in the UK in 2007. Crowd Investments Limited is an Appointed Representative of Prospect Capital Ltd, authorised by the Financial Conduct Authority in the UK, and investor benefits will be available under the HMRC’s EIS and SEIS schemes.

I recently interviewed CrowdInvest’s co-founder Nakul Garg, an alumni of the London School of Economics. With his permission, here is that interview that was originally published at his LinkedIn account.

Let’s begin with something that many people ask. The Financial Conduct Authority approves CrowdInvest. Particularly for anyone new to equity crowdfunding, does this mean their money is safe?

Money is safe, and we will comply with all FCA requirements and vet the startups we will host to ensure they offer viable investment opportunities. We also ensure that lead investors back the deals and that the risks borne by retail investors are shared with them. However, the failure rate of startups anywhere is notoriously high, and the success of any individual startup cannot be guaranteed. Capital invested in private companies will always incur a level of risk.

UK investors who buy shares through equity crowdfunding enjoy valuable tax advantages when they invest in privately-owned UK companies registered under the HMRC’s EIS and SEIS requirements. Why will they choose to invest in Indian startups?

This is something we seriously thought about. Our solution is that we will require Indian startups to open a branch office to scale their operations in the UK. Doing so will make them eligible for the HMRC’s EIS and SEIS tax benefits. Also, we will onboard UK startups who are already eligible for EIS and SEIS tax benefits and wish to scale up operations in the Indian market.

So the CrowdInvest platform will also host non-Indian startups?

In the first phase, we will focus on startups located anywhere in the world who operate in or want to scale up in the Indian market. They will principally, though not exclusively, be Indian startups. In a second phase, we will onboard investment opportunities from African and south east Asian markets and open up opportunities for investors from other parts of the world. We will truly be a cross-border platform.

Does CrowdInvest have to be approved and regulated by any Indian authorities as well?

No, when we start trading, we won’t cater to Indian investors, so we are not required to be regulated by the Indian regulatory bodies. All our financial promotions will focus on UK investors, so we need to comply with only UK laws and regulations.

What investment options will CrowdInvest provide?

In the first phase, our focus will be on equity crowdfunding and convertible loans. We will start offering other alternative financial instruments as we grow our market penetration.

How will CrowdInvest win the trust of investors? 

We will make sure only vetted startups are onboarded on the platform. The vetting process will include rounds of preliminary checks and due diligence to ensure they have the required certificates, licences, intellectual property, and everything else in place per UK standards.

Other crowdfunding platforms have webinars for startup founders to pitch to potential investors and for investors to ask questions. Will you be doing the same?

Yes, we will, through panel talks, speed date sessions, virtual round tables and YouTube. CrowdInvest will also provide newsletter inclusions and social media promotions. 

With the market value corrections that have taken place this year in the startup space, it has been reported that Indian startups have shed over 11,000 employees, and several are now operating at valuations lower than their IPO. Is there any feeling you may have maybe missed the peak market?

In India,Inc42collects data and reports on the startup scene. They said a little while ago that 57 VC funds launched in 2022, 37 focus on early-stage funding. Seed stage funding in India in the first half of 2022 has been four times higher than in 2021. So whilst a market value reset has certainly taken place, many investors had already turned their attention to the higher ROI generally available from backing startups earlier in their lifecycle. This is where CrowdInvest will operate. So No, we haven’t missed out on anything.

That’s very positive to hear. We’re nearing the end of the interview. Can I ask you what is your own background in crowdfunding and what drew you to it?

I started in the crowdfunding industry three years ago and have since carved out a niche for myself in cross-border investments and fundraising in the Indian startup ecosystem.

I graduated with a Masters from the London School of Economics and gained more than eight years of experience in entrepreneurship and risk consulting, with an extensive background in business development and crowdfunding. My expertise lies in developing and maintaining strong client relationships.

I am also a recognised early-stage entrepreneur, endorsed by the LSE Entrepreneurship arm (LSE Generate) and incubated at IIM (Indian Institute of Management) Udaipur Incubation Centre. Additionally, I have worked with PricewaterhouseCoopers in Consulting and served US-based startups with their financials while working at a PCAOB registered firm (the Public Company Accounting Oversight Board).

That’s very impressive and well-rounded. A final question, if I may. Do you already have some longer-term aims for CrowdInvest?

We will certainly democratise platform ownership by running our own equity crowdfunding. Our vision is to become a crowd-owned alternative investment platform operating across international borders.

Thank you, Nakul. I wish you success. Thank you, Clive.

Crowdfunding for Agriculture: Agritech and New Foodstuffs

The world’s population is expected to have grow by over 2.3 billion people from 2009 to 2050. To feed the world population by then, food production will have to increase by around 70% from the 2005/07 levels (source: The World Bank). Meeting this world demand for food is going to need innovation in agriculture: selecting what to grow, how to grow it, learning how yields per acre of land can be raised, and reducing food waste significantly. Innovations and breakthroughs do not have a past history for banks, other traditional lenders or investors to weigh up the potential risks and returns. Crowdfunding for agriculture, agritech and new foodstuffs will help develop the innovation needed to feed over 9 billion people by 2050.

It’s more than just the number of people

Annual economic growth forecasts for developing countries are around 2.9%, which will reduce economic poverty substantially. Rising income levels usually drive an increased demand for meat, eggs and dairy. This in turn boosts pressure to grow more corn and soybeans to feed more cattle, pigs and chickens. If too many farmers follow this trend it would still mean shortages of subsistence crops for the poorest people.

Other complications include:

  • an increasing level of foodstuff used for biomass fuels
  • methane produced by livestock is a significant contributor to greenhouse gasses
  • extreme weather conditions associated with climate change will ruin crops more often

On the plus side:

  • hydroponic farming enables more efficient use of resources
  • robotics coupled with better data collection will allow greater use of artificial intelligence
  • better crop selection, reduced infestations and better-timed harvesting will improve arable efficiency and yield levels
  • food waste can be significantly reduced

Types of crowdfunding for agriculture

There are different types of crowdfunding, all based on the broad principle of getting a little bit of support from a crowd of people, rather than try to get all the money from a single source.

Donations crowdfunding is what it says; people donate and expect nothing tangible in return. The satisfaction of having helped a cause or an idea they empathise with is enough.

Reward crowdfunding was originally a way to incentivise donors with a perk – some form of a related benefit: perhaps a product sample; a t-shirt as a thank you; or a mention on a website page. This developed in to commercial reward-based crowdfunding, whereby crowdfunding platforms can be used as virtual sales channels: a “donation” is “rewarded” with a specified product item that can be made on demand. The sums involved can range from very modest projects to some generating over £1m of orders.

crowdfunding for agriculture

It is common for startup creators of an innovative product to use reward-based crowdfunding to check marketplace traction. On achieving good results they move on to equity crowdfunding to set up a solid business. A great example is The Cheeky Panda, which has disrupted the paper tissue market with a plant-based alternative. It began in 2016 with a reward-based crowdfunding project that aimed to generate £10,000 of orders for tissues made from sustainable bamboo, which has three crops a year. After just five years’ trading and four rounds of equity crowdfunding, plus VC and institutional investment, the business is currently valued at £80m. Its founders are reportedly planning an IPO in 2022 at a flotation value of £300m.

The UK remains a global leader in equity crowdfunding – which is the raising of investment funds through trading shares in a business via a crowdfunding platform. By comparison, U.S. equity crowdfunding remains complicated by a two-tier system of accredited and non-accredited investors; limits on how much businesses are allowed to raise and individuals can invest; and strict (expensive) legal verification of documents. After a brief trial period in China it does not exist at all. It is banned by the financial authorities in India who claim the majority of people need to be protected from both scammers and from inherent financial investment risks they do not understand. 

In peer-to-peer lending, crowds of retail investors make money available to P2P loan companies, for whoch they receive a higher fixed rate return than the retail investment levels generally available to individuals. With fixed repayment dates, it is a more liquid form of investment than taking equity in startup businesses. P2P lenders make the funds available to vetted borrowers. Without having to pay middlemen, shareholders, or finance a legacy infrastructure of bank branches, it means the borrowers can pay lower interest rates. Approval and access to the money is also much faster.

Folk2Folk is a UK P2P lender specifically for the crowdfunding for agriculture / farming sector.

Crowdfunding new foodstuffs

Seaweed is being hailed as a “superfood.” It is increasingly used as a basis for snack products, and for meat-free mince used in sausages and burgers. It can also be used in fabric to make clothing, in cosmetics, and feeding seaweed to cattle can reduce their methane output by up to 80%. While it is growing, on undersea ropes, it is more effective at removing CO2 from the environment than forests on the land.

Seaweed farming is in its infancy in the UK. Traditional lenders and investors lack a database of past performance against which they can assess the risks and potential returns. The modest sums often sought for early stage developments are not large enough to interest VCs. 

Yorkshire-based Seagrown reached its reward crowdfunding target of £25,000 in August 2021, which will allow it to seed an extra four kilometres of rope. The seeded ropes will be suspended just offshore in the North Sea in October, and Seagrown expect to harvest their crop in summer 2022. The perks for the biggest backers include a boat trip out to the rope lines. This will give Seagrown’s founders a unique opportunity to spend time with them and find out how much they may be prepared to invest if they decide to go ahead with equity crowdfunding. Crowdfunding is good marketing and network building, it can open doors.

In 2019, the US plant-based food company AKUA launched the world’s first kelp burger made from sustainable seaweed. In 2018 they had used reward-based crowdfunding to generate $80,000 of orders for a packaged kelp jerky product via Kickstarter and Indiegogo. Then from early November 2020 to late April 2021, they raised $1,070,000 (the maximum permitted at the time) via the US equity crowdfunding platform Republic. This reinforces that progression from reward to equity crowdfunding is now quite a standard path. AKUA’s success, and that of all similar businesses, creates a growing market for seaweed farmers.

A kelp burger exemplifies the impact of crowdfunding for agriculture
A meat-free burger made from kelp, a type of seaweed. Source: AKUA

An example of crowdfunding for agriculture related to clothing is a young UK entrepreneur, Adam Costello. He grew up near the Anglesey coast. Time spent clearing plastic waste from the sea and the beaches led to a business plan to make clothing using seaweed fibre, and decorate it with messages about ocean sustainability. He offered the clothing to early backers through Kickstarter. His gross order value was modest, just over £14,000, though it was enough to start his Inland Sea business. This shows how crowdfunding provides an individual with a way to follow their passion and start making a difference, as well as an income.

Crowdfunding hydroponic farming 

Also known as vertical farming, crops are grown indoors, in stacked layers, in nutrient-rich water instead of soil. Hydroponic farmers manage and maintain optimal nutrient levels in the liquid solution. It means food can be grown anywhere there is a supply of fresh water and energy for lighting – no soil required! Food can even be grown underground or in surplus office blocks, nearer to population centres in hyper-local supply chains. This reduces the food miles required to put it on to consumers’ plates. It uses far less water per volume of food produced, and no pesticides, making it more sustainable and climate-friendly.

A World Wildlife Fund 2020 report estimates indoor farming will have an annual growth rate of over 24% between 2018 and 2024, hitting $3 billion in revenues worldwide in 2024. 

At a startup level, Harvest London raised over £400,000 in 2019 to grow food to order in the heart of London for restaurants. They are still trading, desite the hospitality shutdown during the Covid pandemic.

Also in London, UK, Square Mile Farms raised over £500,000 through equity crowdfunding in June 2020. They install vertical farms in workplaces, to engage employees in their maintenance and help businesses create a culture of healthy, low-impact living. Early customers included the major property owners and developers Grosvenor Estates and British Land, plus Vodafone. The property owners became active partners through providing access to their commercial tenants.

crowdfunding for agriculture
A hydroponic herb tower

More recently, another specialty B2B operator, Local Indoor Farming (LIF) in The Netherlands, raised €108,000 in July 2021 through a crowdfunding campaign on the CrowdAboutNow platform. LIF will now manufacture and provide herb towers to hotels and the catering industry so they can grow their own fresh ingredients in a totally controllable manner in limited space.

On a much larger scale, Aerofarms is a US agritech business that began in New Jersey in 2004 and today it has indoor vertical farms across the country. In 2010 it raised an undisclosed amount through equity crowdfunding. They use any available buildings that are large enough, including former factories and nightclubs, even a paintball venue. In 2019 Aerofarms invested $42m in a 150,000 square feet purpose-built facility in Virginia. A recent investor in 2020 was the Abu Dhabi Investment Office (ADIO) that wants to grow food in its desert. In 2021 Aerofarms completed an IPO. They are listed on the NASDAQ exchange and currently valued at $1.2 billion. They claim they grow 400 times more food per unit of land than conventional farming can achieve.

Hydroponic farming provides several examples of crowdfunding for agriculture
Inside an Aerofarms hydroponic vertical farming facility

Crowdfunding for agriculture technology – agritech

Drone Ag provides farmers with drones they can fly using software loaded to their mobile phone. Without having to be there, they can spray crops, check that crops are growing well, spot infestations, and create images far clearer and more detailed than using satellite-generated ones. This enables better control of pests and soil nutrition, reduces costs and chemical use, and ultimately increases yields and profit. The two business founding brothers were farmers themselves, and through absolutely understanding the challenges that exist today they have created technology that will handle the future. They raised almost £300,000 in 2019 in exchange for approximately 16.6% equity, and then a further £300,000 in 2020 for 10.7% equity.

In the last 12 months, UK-based Small Robot Company has transitioned from prototypes to a commercial service. It uses an autonomous robot and AI software to create a weed map for customers. Fungicides and biopesticides can then be applied with precision to reduce the amounts wasted in places where they are not needed. In August 2021 Small Robot Company raised £4m through equity crowdfunding to manufacture a fleet of robots for its commercial weed mapping service. Two other devices under trial include the world’s first 5G-ready agri-robot for arable farms, and SlugBot is the world’s first robotic monitoring and bio-molluscicide treatment system for slugs.

Crover is a new business in Scotland. Its crowdfunding for agriculture technology was to develop a robot that burrows down in to cereal crops stored in silos or while it’s in transit at sea. The robot checks non-visible conditions inside the crops: humidity, temperature, presence of any pests, and so on. In August 2021 it raised £337,000 through equity crowdfunding. Crover’s next steps include pilot tests in the UK and Italy as part of the agROBOfood Innovation Experiments throughout March 2022.

Crowdfunding for agriculture will accelerate the innovation in new foodstuffs and agritech required to feed over 9 billion people by 2050.

I originally wrote this article for Crowdsourcing Week as part of its Content Marketing programme.

Crowdfunding is Great Marketing. Have you heard about “The Oscars for Crowdfunding”?

Crowdfunding BOLD Awards

It’s said by many people – not just me – that as well as raising money, effective crowdfunding is great marketing. It gets you written about and maybe interviewed. It gets you noticed by would-be suppliers, collaborators, distributors, influencers, affiliates and stockists, as well as backers. I made one of own investments after being impressed when I saw, by total accident,  a startup CEO interviewed on television about her crowdfunding project.

Crowdfunding is one of twenty categories in the third annual round of the international BOLD Awards. Their aim is to recognise and shine a spotlight on crowd-related breakthroughs and innovative people, businesses and projects that are leading the way and setting an example in digital industries. Other categories include AI, Robotics, AR/VR, Crypto, Fintech, Cybersecurity, Agritech, Sustainability…….. here’s the full twenty categories.

Here’s how it works. Entries are submitted online, naturally, and can be viewed by potential voters and continually updated by the entrants. There will be a public round of voting early in 2022, which is an opportunity for entrants to mobilize their communities and “get the vote out.” An international panel of judges will then take a look at the entries, and winners in each category will be decided through a blend of public votes and judges’ appraisals.

Winners will be able to collect their awards at a prestigious black-tie gala dinner on March 25th, hosted by Europe’s largest accelerator hub, H-FARM, on their campus just outside Venice. It will be a unique event, with unrepeatable opportunities to network and connect with leading edge innovators and disruptors among the other winners, the judges, and invited VIPs. Given that crowdfunding is great marketing, here will be your chance to make an impression in person.

Plenty of candidates would be able to enter under several categories. As an example, the Small Robot Company, with its agritech robots controlled by AI and working to improve sustainability, has recently concluded a round of equity crowdfunding in the UK.

Previous nominees in the Crowdfunding category include Startup Italia and Borrow A Boat from the UK.

Entries are open, with the price held at €77 until September 15. If you have worked hard and enjoyed crowdfunding success, get some recognition at the BOLD Awards gala dinner award ceremony in Venice in March 2022. Register to enter now, and maybe I’ll see you next March in Venice.