Crowdfunding successfully matched a local entrepreneur with local investors to capitalize their new downtown business, directly impacting talent retention and downtown redevelopment.
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Traditional funding templates often do not match modern business opportunities; in fact small business hears â€œnoâ€ from traditional funding sources 95 percent of the time, yet is responsible for 65 percent of net new jobs over the past 17 years!Â Until Michiganâ€™s crowdfunding legislation passed in December, 2013, 93 percent of local investors were denied the opportunity to put their money where their hearts areâ€”the local businesses they know, trust, and loveâ€”because they are â€œunaccreditedâ€ investors (meaning not rich!)
National demand for crowdfunding has never been strongerâ€”it has TRIPLED in the just the past three years with an estimated $5.1 billion raised in 2013 alone! Crowdfunding is a revolutionary way to capitalize local entrepreneurs, and Michigan has one of the most progressive investment crowdfunding opportunities in the nation. For those looking to start a new venture, grow an existing business, or invest in real estate, investment crowdfunding offers an effective alternative to traditional funding, or can help supplement it. It puts the local economy directly in the hands of the local communityâ€”so now anyone from Michigan can invest in a Michigan business.
- Tecumseh Brewing Company raised $175,000 (their funding goal) through 21 investors in advance of their fundraising deadline!
- Over 100 investors expressed interest in Tecumseh Brewing Company; 16 of the 21 investors had no prior relationship with Tecumseh Brewing Company.
- They were fully funded in half the time anticipated and had to turn away interested investors.
- They plan a total investment of half a million dollars in the community.
- They plan to employ 10 staff.
- They plan to locally source as much as possible, including materials, labor, food, supplies, etc. to create even more positive economic ripples in the local community.
- Their business philosophy is to be a brewpub for the community, including being active in hosting and sponsoring community events that add to the vibrancy of the downtown, the community at large, and the success of their business.
- The Brewery is completing a rehab and retrofit of a building in the heart of downtown Tecumseh, including residential apartments on the second floor.
- The Brewery is expanding its outdoor space in the back of the building to accommodate a beer garden.
- The City of Tecumseh retained smart, creative, talented people willing to put down roots and grow their success and the community through crowdfunding.
- One of the owners and his wife are from California, and attended the University of Michigan; crowdfunding helped make it possible for them to stay in Michigan and grow a business here.
- Michigan is quickly becoming a national example of how crowdfunding can spur significant economic growth.
- Family and friends helped seed initial business development and startup costs for the first couple years.
- Local economic development entities connected Tecumseh Brewing Company to myriad resources, most importantly crowdfunding; Lenawee Now (formerly the county economic development corporation), and the City of Adrian DDA & Economic Development.
- The City of Tecumseh/DDA provided assistance in building acquisition, rehab process, outdoor seating expansion, and permitting.
The fees associated with a crowdfunding platform (Localstake was used in this successful raise) vary depending on the scope of services provided.Â For example, consultants can be hired to assist in developing business plans and documents.
Seed funding was provided through family and friends, with gap funding of $175,000 raised through crowdfunding, and a substantial amount to come through traditional bank financing.Â Property improvement/faÃ§ade grants were available through the DDA and other sources.
- Find what you love to do and decide where to do it.
- Do your research and make use of local resources and information. The City of Tecumsehâ€™s blueprint study was a key source of information that Tecumseh Brewing Company used in backing their intuition with data.
- Identify a couple champions in the system to help guide you and assist you in breaking down walls (literally and figuratively!). The local city and DDA staff and Lenawee Now were extremely helpful in guiding Tecumseh Brewing Company through the process of property selection and acquisition, building rehab, permitting, licensing, etc.
- Get the boring stuff together early; business plans, articles of incorporation, etc. Have these foundational documents in order before beginning any formal fundraising.
- Cultivate a following through community ties, family, social media, and good old fashioned word-of-mouth. These are your potential investors and customers! (But be careful not to solicit investors for crowdfunding on social mediaâ€¦this could violate the intrastate investment requirement.)
- Find ways to make your local business a community business by sourcing whatever you can locally. It adds to your authenticity, it is good for the environment, and super-charges the local economy. Tecumseh Brewing Company will offer grilled cheese made from a local creameryâ€™s cheese, YUM!
- Rehab what is already there and reclaim bits of the community to work into your space wherever you can. Old stuff is cool and usually less expensive.
- Start selling swag early, even before the opening, to generate buzz and following. Use social media but also start establishing a presence in the community at various events.
- Use a well-established crowdfunding platform with proven success. Tecumseh Brewing Company used Localstake .
- Be prepared to give an â€œelevator pitchâ€ about what crowdfunding is and how it works. Crowdfunding is new to people so youâ€™ll be selling not only your business opportunity, but the mechanism for investment. Be sure â€œlegitimateâ€ community representatives are well versed as well (the Chamber, DDA, local leaders, etc.)
- Get funded, and get going!
Â Lessons Learned
- Do not take the first or easiest option in locating. In the case of Tecumseh Brewing Company, waiting for just the right spot in the heart of downtown will define the brewery and drive success as much as its award-winning brew master will! And the business will benefit tremendously by playing off established downtown events.
- Spend the time discovering and articulating what makes your idea unique. Tecumseh Brewing Company is proud of its approach to brewing, which is a distinct break from a corporate brew structure, and is excited to be a community business with strong, deep roots in Tecumseh.
- Share your plans with your champions and get their real feedback. Let them shred it so you can revise it and make it better, then let them shred it again, then do it again, then do it one last time. Preparing to pitch investors is serious business, so be ready to make your case and anticipate concerns and tough questions.
- Be patient with fundingâ€”some will come slow, and there may be lots of bits and pieces to assemble, but stick with it! Crowdfunding can be the critical piece of gap funding that takes you from getting started to getting profitable.
- Tell your story and give people an experience. Crowdfunding works well when there is a local, emotional connection, as well as a great business case. Tecumseh Brewing Company hosted tasting events where potential investors could see the future space, view pictures/sketches, logos, sample menus, etc. and, most importantly, meet the owners. This personal connection helped get Tecumseh Brewing Company fully funded in half the allotted time.
- Consider whether you are prepared to be a true community-based business and, if so, shout it out loud and proud! If you plan to sponsor downtown events, reinvest in the community, hire and source local, let everyone know it. It will make investing a good economic decision as well as a heartwarming one.
Tecumseh Brewing Company is the first company in Michigan successfully funded through crowdfunding/MILE.Â Stay tuned for more success stories!
Contact the Experts
- Summer Minnick, firstname.lastname@example.org
- Kyle DeWitt, email@example.com
- Chris Miller, CMiller@adrianmi.gov