I’ve been thinking a lot about this idea as I’ve been following the recent news from R. Shea Brewing.
Here’s the Cliffs Notes version of what’s happened.
From 2015 - 2019, R. Shea was a small local brewery. In 2019, it opened a much larger, 60,000 square-foot second location, which enabled it to significantly expand its production and operations. That expansion, however, also included a vast expansion of its debt, to the tune of a $2 million SBA loan. A combination of the lingering impacts of Covid, rising wages and production costs, and skyrocketing interest rates have created a situation in which R. Shea in now unable to service that debt.
As a result, it just launched a GoFundMe campaign to raise … wait for it … $2.3 million. Thus far, it’s raised approximately $17,000.
Here’s the Cliffs Notes version of what’s happened.
From 2015 - 2019, R. Shea was a small local brewery. In 2019, it opened a much larger, 60,000 square-foot second location, which enabled it to significantly expand its production and operations. That expansion, however, also included a vast expansion of its debt, to the tune of a $2 million SBA loan. A combination of the lingering impacts of Covid, rising wages and production costs, and skyrocketing interest rates have created a situation in which R. Shea in now unable to service that debt.
As a result, it just launched a GoFundMe campaign to raise … wait for it … $2.3 million. Thus far, it’s raised approximately $17,000.
“We’re kind of at the point now where we pay the Small Business Administration loan or we pay the rent and utilities. But we can’t pay both,” reports Ron Shea, the brewery’s founder and owner. Without significant intervention, he says that the entire operation will be insolvent by the first quarter of 2024. Each $250,000 raised would buy the brewery another year of operations. Raising the entire $2.3 million would pay off the whole SBA loan, along with other private debt.
Your business is not a charity; it’s not your customers’ job to pay off your debt, no matter the cause.
If you want to turn to you customers to raise capital, treat them as investors, not charitable donors. They should get something in return for their investment other than a hearty “thank you,” a discount coupon, or other perks. In other words, you should be giving them … equity.
For example, also this month, another local brewery, Saucy Brew Works, launched a crowdfunded capital raise. Instead of GoFundMe, however, it’s using StartEngine, an SEC-registered broker-dealer/funding portal (as SEC Regulation CF requires for crowdfunded investments from non-accredited investors). Crucially, instead of a “thank you” or a brewery perk, Saucy’s investors are receiving equity in exchange for their cash.
It’s okay for a business to ask its customers for an investment (cash in exchange for equity) to aid growth. It’s not okay, however, for the same business to solicit charitable gifts (cash in exchange for good will, perks, or nothing at all) to bail it out from a poor decision or other crisis.
I wish R. Shea Brewing all the best. No one wants to see a business fail, especially in an industry that I love, support, and represent. I just have serious concerns over the methods it’s using to try to save itself.
Your business is not a charity; it’s not your customers’ job to pay off your debt, no matter the cause.
If you want to turn to you customers to raise capital, treat them as investors, not charitable donors. They should get something in return for their investment other than a hearty “thank you,” a discount coupon, or other perks. In other words, you should be giving them … equity.
For example, also this month, another local brewery, Saucy Brew Works, launched a crowdfunded capital raise. Instead of GoFundMe, however, it’s using StartEngine, an SEC-registered broker-dealer/funding portal (as SEC Regulation CF requires for crowdfunded investments from non-accredited investors). Crucially, instead of a “thank you” or a brewery perk, Saucy’s investors are receiving equity in exchange for their cash.
It’s okay for a business to ask its customers for an investment (cash in exchange for equity) to aid growth. It’s not okay, however, for the same business to solicit charitable gifts (cash in exchange for good will, perks, or nothing at all) to bail it out from a poor decision or other crisis.
I wish R. Shea Brewing all the best. No one wants to see a business fail, especially in an industry that I love, support, and represent. I just have serious concerns over the methods it’s using to try to save itself.