BrewDog's Equity Strategy: Targeting, Presenting and Legalizing

BrewDog Brewery rallies their army

                Last week, U.K.'s explosive start-up BrewDog brewery gave their advice on organizing and distributing shares of an equity crowdfunding campaign.  They should know; BrewDog is one of equity crowdfunding's biggest stars, so far raising almost £5 million.  Its unparalleled success has a lot to teach U.S. start-ups as they construct their own strategies for amassing capital through the crowd.   Crowdlanding also asked Brew Dog about how they reached these thousands of loyal followers and how U.S. start-ups can do the same.

Target Audience

As with any marketing campaign, catering to those with no interest in the company is a waste of resources.  Brew Dog knew this intuitively, and pinpointed only those that were already interested in the company.  By making the offering known on their website, social media pages and in the bars themselves, they immediately informed those most interested in the company.  The interest was free to spread from there, on to Brew Dog’s friends’ friends and other beer enthusiasts.  With a quality product that is tested with emerging popularity, the statement holds true that “if you build it, they will come.”  American start-ups can likewise leverage this effective strategy.  Most CEO's see their initial following as merely a positive record to show to larger, accredited investors, but presenting fans with investor options is not only simple, direct and intuitive, it also strengthens loyalty within the company.  Show your first customers, clients and fans your offering and gauge their reaction; with proper presentation, it's likely they'll want in.

Presentation

Every company is good at something, does something different than the others.  This is especially true of enterprises that have turned to the crowd.  Brew Dog lets their home-grown English punk roots show and it has become the banner behind their campaign.  Though the details of their financial position, their plans for the investment and other economic concerns are available through their website, most investors in the crowd aren’t interested in the fine print.  Crowd investors are spurred by love of the company and Brew Dog’s Equity Punks want a good brew at a good price.  Knowing this, Brew Dog presents a strong renegade position against the sleepy details of equity finance to pique interest and then highlights their quality product.  “BrewDog is a company that is genuinely doing something different and wants people to get excited about it,” explains Warman.  Building a market around company culture, especially the rebel innovation that surrounds crowdfunded enterprises, draws customers/investors in.  Pivoting to the quality, versatility or tech disruption of the company or product will keep them in.

Legal Details

Though Brew Dog, like all companies utilizing crowdfunding, challenges the conventional means of business funding, there’s no need to explain why it’s still imperative to be on the right side of the law.  U.S. Startups have assented by waiting for the full acceptance of the JOBS Act before beginning their offering.  Likewise, BrewDog assured their investment plan was approved by the U.K.’s Financial Services Authority (FSA), similar to the U.S. Securities and Exchange Commission, which American companies must comply with when the JOBS Act rules are finalized.  “The EFP prospectus” which is available online at BrewDog’s website “contains the full details of the share offering including perks, sale price and company value calculations and potential risks.  We’ve got nothing to hide.”  In the wake of mountainous corporate scandal in the U.S. and with crowdfunding critics casting doubtful eyes from the risk of investment fraud, this transparency and candid approach is central to running an equity campaign.  There should be no mystery as to how to obtain the full documentation of the company and the equity plan and the easier it is to obtain, the better.  Equity crowdfunding, like its predecessor, rewards crowdfunding, is heavily reliant on relationships, promise and trust; an upfront attitude is the first step towards establishing those crucial relationships.  

To see how their new offering is going and for more information on Equity for Punks and their amazing beer, visit BrewDog.com  

Next week; Social media, crowdfunding and storytelling: getting attention, interest and investment 

BrewDog Brewery's £4 Million Equity Strategy

      

With equity financing via crowdfunding eagerly awaiting approval in the U.S., many start-ups ready to put their business before the crowd are putting together their strategies.  Many European businesses, most pointedly those in the U.K., have already flourished with equity crowdfunding.  Among the most noted success stories is U.K. brewery company BrewDog.  The BrewDog empire has expanded with astonishing speed, partly due to their massively successful equity crowdfunding campaign dubbed “Equity for Punks.”  Brew Dog currently consists of a dozen bars, an eco-friendly brewery and a universe of craft brews.  They’ve leveraged equity crowdfunding a total of three times, allowing their growing following of fans and admirers to own a stake in the company.  The first round sold out quickly, drawing 6,000 devotees in 2010. The number rose in  2011, amassing £2.2 million and they’re presently taking on round three.  So far it’s been the most lucrative round yet, passing £2.5 million of their £4 million goal, with £1 million raised in only 24 hours. 

                Equity for Punks is a new, edgy equity campaign epitomizing the kind of innovation that crowdfunding has attracted since its inception.  Its unparalleled success has a lot to teach U.S. start-ups as they construct their own strategies for amassing capital through the crowd.   Crowdlanding asked Brew Dog about their success, and what tips they have for other punk businesses turning to the crowd.  More advice from this fast-growing equity empire will be featured in upcoming posts.

BrewDog attacks conventional finance

How to organize, distribute, and reward shares.

Obviously, as with any equity offering, you don’t want to commit more ownership of your company than you’re willing to give away.  Equity crowdfunding has a distinct advantage over traditional funding resources, however.  Instead of sacrificing a percentage of your hard-won company to one or several investors who are apathetic to its development past profitability, company ownership goes to hundreds or thousands of like-minded fans who are passionate about what you’re doing and care about your company’s success.  Though they may not have the expertise and guidance that venture capitalists can offer, they imbibe a foundation of enthusiasm and support.  Crowdfunding employs large masses instead of a small group like traditional funding, so the perks and opportunities the shares offer are going to be different.  Brew Dog rewards their biggest fans with some advantages of traditional shares, as well as list of perks rewarding their love of the brew.  “Anyone who invests in Equity for Punks owns part of the company, brewery, bars and beers—you get a say in how the company is run, and can vote on key decisions on the Equity Punks forum and at shareholder events,” said Sarah Warman, representative of Brew Dog brewery.  “Equity Punks” also get lifetime discounts at bars and through the online store, store credit and an invitation to their AGM, which has become a legendary event among beer enthusiasts.  Not only does this arrangement make Brew Dog’s fans feel like part of the family, but it gives Brew Dog a direct resource to draw on when answering questions regarding market preferences, choices and interests, a pulse which many companies pay steep prices in market research to get a read on. 

Advertising the Offering

BrewDog's founders and fans

Even more surprising about their almost 5 million pound equity offering is that Brew Dog never used advertising to attract fans.  Brew Dog’s “Loyal allegiance of hugely passionate beers fans and online community has been the driving force behind it’s success” said Warman.  Brew Dog’s investors are large and small and representing a range of regions in the UK and beyond, but they have one thing in common; they love Brew Dog beer.  This strategy ensures good initial relations with investors, however it sets a high bar for upcoming decisions.  With love, loyalty and, now, money invested into Brew Dog, supporters have a zealous interest in seeing their opinions properly represented. 

To find out more about BrewDog, Equity for Punks or order their award-winning craft brews, visit their website. 

 

Next; BrewDog talks audience, target markets and legal details with their successful equity strategy. 

The Experiential Crowdfunding Handbook: A first-hand guide to crowdfunding

  

After the crowdfunding industry doubled from 2011 to 2012 from $1.5 billion to $3 billion, thousands of entrepreneurs, artists and organizations in every industry imaginable have pitched their ideas directly to their prospective supporters and customers.  Some, such as the famous Pebble watch or OUYA game, which hit Best Buy shelves this month, met with legendary success, while thousands of others close each day with unmet expectations. Crowdfunding is not without its challenges, and success demands as much--or more--time, planning and hard work as any other capital resource.  Active crowdfunding requires daily hours of networking, interaction and marketing to keep the momentum rolling and pre-launch projects have no chance of success without a careful strategy and a well-developed and articulated concept.  Even with a desirable concept, reaching out to “the crowd” can be challenging.  Approximately 44% of projects on the Kickstarter platform will succeed and the bulk of crowdfunding’s growing numbers is concentrated in a small amount of highly-successful projects (One study found a top 1% of Kickstarter projects accounted for 36% of funds raised).  Many worthwhile ideas get overlooked from lack of proper marketing or development while many frivolous concepts get funded through carefully planned exposure and outreach strategies.

Chatty Kidz, an Ipad app that provides engaging learning for children through a worldwide

visual chat interface, is an ideal project for the crowdfunding industry.   Chatty kidz is supported by many of the same pillars that drive crowdfunding; greater good--teaching children--and uniting people--kids and their extended families.  Building off experience in e-learning, Founder Ken Taggart developed the concept after noticing how quickly his young children would lose interest in talking to their grandparents online.  Using the photo-sharing prototype of Chatty Kidz, the interaction changed.  “They could spend 10 minutes talking about each photo, that’s 10 minutes spent with their grandparents they otherwise wouldn’t,” said Taggart.  Building off the photo-sharing, he combined

choice words and images to go over with grandparents, increasing the interaction length while also helping the children learn.  “Parents want to see kids learn, grandparents want to spend time with children, kids want to have fun,” he explains, which Chatty Kidz facilitates. Chatty Kidz is currently available in the Apple App store with first-stage capability including a picture sharing and communication interface.  A series of reading words for children and families to review together are under development, and included in the rewards section of Chatty Kidz Kickstarter campaign.

     After negotiating with investors with a previous enterprise he founded, Taggart was determined to keep Chatty Kidz independent for as long as possible.  Through careful planning and marketing strategy, Chatty Kidz saw a great launch, earning approximately 30% of its funding goal in 3 days.  Taggart researched crowdfunding extensively before launching and followed many of the parameters and tips crowdfunding authorities have advised.  All the same, Taggart, like all project organizers, has acquired his own experiential handbook of crowdfunding tips and tricks.

The 30% Rule

Taggart leveraged his personal contacts to assure his project was guaranteed to be 30% funded in its beginning stages.  This initial funding helps to assert the project’s position and instigate the “herding effects” in which other backers support campaigns they believe will be successful.  Kickstarter reports that “81% of projects that raised more than 20% of their goal were successfully funded.”  Though some crowdfunding columns assert that this 20-30% will help the project drive its own momentum, Taggart was quickly disillusioned to the effect.  “You think it’s definitely going to get a life of it’s own through the kickstarter community” said Taggart, though it’s difficult to engage Kickstarter backers unless the project is elected to a popular space on the homepage.  Continuous engagement across a variety of spaces is key to keeping the momentum rolling.

Project Development

The Chatty Kdiz app is already available for download, allowing families to connect and learn together in its current stage.  This initial utility is paramount to prove to prospective backers that the project is not only legitimate, but that the team behind it is effective and the project will deliver on its promises.  This capability assures backers that their donations are in good hands and gives a platform for the project to stand on.  Articulating this initial capability clearly and concisely through descriptions or, better yet, through an engaging video, is equally as important as the utility itself.  Assuring donors understand the project in its first stage helps them understand the direction the project is going and exactly what their donations are buying.

Social Network

The project organizer’s social network is square one for the campaign, and influences the direction of the campaign.  According to a study conducted by the Wharton School of the University of Pennsylvania, “a founder with 100 (facebook) friends would have a 20% chance of success and one with 1000 friends would have a 40% success rate”.  However, the size of the network is only one component of online outreach.  “One of the biggest things I took away from the campaign was the power of twitter and how many people you can reach,” said Taggart, “However, the return from twitter is a much smaller, limited interaction” and doesn’t necessarily translate into site views or pledges. The reliability and familiarity of online friends to the project (and to the organizer) is another key aspect.  To spread outside the organizer's own social network, the project needs bannermen, friends who are completely familiar to the project and enthusiastic enough about it to tell others.  Informing as many people as possible helps solidify bannermen early on and extend the reach of the message.

Public Relations

Researching the project’s industry and reaching out to as many affiliates and authorities in the space as possible opens the conversation to an extended family of interested and passionate parties.  For Chatty Kidz, Taggart located active members in the e-learning field willing to carry the message.  To help make the project clear to educators, writers and bloggers, Taggart issued press releases detailing the project and campaign.  Making information clear and easy to locate is vital to engaging online gatekeepers such as bloggers, journalists and social media aficionados. How the information is carried, however, varies across projects and, especially, across areas of interest. Though Chatty Kidz’s information was professionally distributed via PR organizations and agents, Taggart says it’s difficult to gauge how effective the press has been in turning readers into backers, and his own efforts using other social networks have yielded more measurable results.   

Early Ignition

Crowdfunding campaigns are heavily reliant on momentum.  Some debate exists between risking initial momentum by advertising the project before luach versus riding the initial spike in activity through an aggressive launch strategy.  It’s true that the initial spark of activity upon launch is crucial to starting the campaign, however the short duration of crowdfunding campaigns make extended awareness difficult without an early start.  Breaking out of the project creator’s own social network can take weeks by itself, and even longer to reach unrelated groups.  Crucial message carriers such as bloggers and journalists also need weeks to fit the feature into their schedule and then write, edit and publish a piece.  “get your project out there and show it to as many people as you can as early as you can,” Taggart advises, while also making an aggressive pitch for the start of the campaign, which contains the most noticeable spike in activity and interest.  

    Chatty Kidz has currently attracted more than 75 backers and $6,000.  Taggart continues to generate support for Chatty Kidz and remains optimistic about crowdfunding, regardless of the outcome.  “I could see myself using crowdfunding more,” said Taggart.  “I’ve learned so much, but still know so little”

    To contribute to Chatty Kidz and to get exclusive capability from this innovative app, visit the Kickstarter campaign HERE.  For more information on Chatty Kidz, see the website HERE.