Dan Norris wants to turn the drinkers of his beers into investors in his brewery.
The co-founder of Black Hops Brewingis keen to use equity crowd-funding platform Birchalto raise further funds for his business.
“The sort of business we are in requires a lot of money to do what we do,” he says. “Any sort of expansion to build a new brewery costs in the millions of dollars. As an entrepreneur I have always struggled to get people to invest in what I’m doing, the banks are really hard work and raising capital is really difficult, you often have to be an expert yourself.”
Norris wants Black Hops Brewingto be one of the early businesses listed on equity crowd-funding platform Birchal, which launched in Melbourne on Tuesdaynight.
The platform is being spun out ofAustralian rewards-based crowd-funding platform Pozible and is founded byPozible co-founder and chief executive Alan Crabbe and former Ashurst lawyerMatt Vitale.
Birchal will be applying to the Australian Securities and Investment Commission for anewly created “crowd-funding service”licence.
From September 29 unlisted public companies with annual turnover and gross assets of up to $25 million will be able to issue shares to the public.
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This will enable retail or so-called “mum and dad” investors to take equity in small businesses and Birchal aims to provide a platform for this.
Crabbeand his team have spent over a year, under$500,000 plus “a lot of sweat equity”, building the platform which will be open for early access from Wednesday and should have the first company profiles available within a month.
Crabbe says there are two majorbenefits for businesses undertaking equity crowd funding.
“Firstlyyou are building a very loyal customer base and secondly if you look at these consumer brands that are verysuccessfulthey are able to build a community of ambassadors and that creates word of mouth and foreveryconsumer brand that is very valuable.”
Crabbe says there is a bigopportunityfor consumer brands and consumer businessesin Australia to leverage global trends.
We have people coming to the bar and asking about it, they come in and want to invest but they don’t have hundreds of thousands of dollars so this sounds perfect.
“We are seeing consumer brands aregrowingas fast, if not faster than technology companies globally,” he says.”I think this is a space that tends to getoverlookedand tech companieseven like ourselves tend to get the spotlight.”
Crabbe points to brewer BrewDog in the UK which was an early adopter of the equity crowd-funding model and was recently valued at over 1 billion.
For investors, Crabbe says the attraction is getting in early.
“They getaccess toearly stage businesses as generally retail investorsdon’tget access to these companies until they are at IPO stage.”
Crabbe says interested businesses can register on Birchal and set up a company profile with basic details of what the business does and the product and services it offers. Companies can create an online pitch for equity or reward-based funding.
“When the legislation comes into effect on 29 September thesecompanieswill be able to run a campaign to either getexpressionsofinterestto raise funds or raise a round of investment,” he says.
Birchalwill take a 5.75 per centsuccess fee on successfulraises and hopes to enable investors to invest as little as $100.
“With every raise there will be a minimum you have to raise and also a time frame inthe same wayPozibleoperates with an all-or-nothingmodel,” Crabbe says.
Crabbepredicts within three years equity crowd funding will attract $100 million a year.
But he acknowledges it’s not all upside.
“Of course these businesses are typically high risk, they are usually fast-growing scale operationsand generally the foundersmay have less experience than some of the bigger companies,” he says.”There is potentially a higher risk for investors.”
Norris has just closed a funding round of $400,000 to expand Black Hops Brewing and says equity crowd funding would have provided a great source for this money if it was available.
Black Hops Brewing is three years old with five full-time staff andturnover of around $1 million a year.
“We have people coming to the bar and asking about it, they come in and want to invest but they don’t have hundreds of thousands of dollars so this sounds perfect,” says Norris. “We are at capacity at the moment, all the tanks are full and we have to expand to keep growing. I think it’s a model that’s going to bereallyinteresting in Australia.”
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