What is community capital?
When we say community capital, we're talking about the ability for communities to fund local businesses. And while there are a few ways that this can happen, the most powerful is through Regulation Crowdfunding- and that's what Mainvest is built on.
Prior to 2016, only accredited investors could invest in privately held companies. This is why non-accredited investors (everyday people) can invest in publicly traded companies, through vehicles like retirement accounts or apps like Robinhood, but only super-rich VCs and angel investors have access to invest in startups. The JOBS Act, Title III, changed these rules, so that through regulated portals, both accredited and non-accredited investors can invest in privately held companies. This vastly expands the available capital from which businesses can seek funding. Mainvest is a RegCF portal that brings this model to brick and mortar businesses, allowing local breweries, restaurants, retail shops, real estate developments, and even cannabis brands to accept investment from non-accredited investors.
Breweries have been the most successful industry on Mainvest: over 70 different breweries have raised over $5,000,000 since 2019.
Here are 3 reasons why community capital works so well for breweries:
1. You can turn existing supporters and craft beer lovers into investors.
Unlike traditional crowdfunding, which is used by non-profits and causes, investment crowdfunding allows anyone to become an actual investor in your brand. By offering customers and community members a chance to invest in your business, you're essentially securing their loyalty to your brand as they'll have a financial stake in your success. Previously, going out and soliciting investment from the general public would have been a huge securities violation (and pretty difficult to manage, as well!) but RegCF allows you to essentially market your business and investment opportunity to the wider public, just as you would market a new beer or upcoming event. And the implications for this are massive:
Instead of running a friends and family round via private placement, you can use RegCF to get everyone on the same terms and manage documents and repayments through a secure platform.
You can legitimize conversations with second and third-degree network investors with a sleek, professional offering page.
You can share the opportunity with everyday people. Think about how many different types of people come into your taproom: someone may actually be interested in alternative investment and unexpectedly become a huge investor. Someone else might not have more than $100, but get all of their friends involved because they love your brand.
You can have access to Mainvest's growing network of craft beer investors who are excited to learn about new opportunities.
Anyone who follows your page, comes into the tap room, or just cares about the industry can become not just a customer, but an investor, widening the pool of potential capital immensely.
2. You control the terms and have control over your campaign.
Breweries tend to have strong brands and followings, and this level of organic marketing lends itself well to crowdfunding. We've found that breweries can pursue creative marketing strategies to raise funds while staying on brand and maintaining relevance to their audience. Breweries tend to be community-driven spaces where visitors are receptive to this new approach to investment, so organic conversations at the tap room tend to convert well. Additionally, events, which are already canon in brewery marketing, can be easily turned into "investment drives" where the business owner can explain the opportunity, offer perks, and get customers excited about becoming investors. One brewery in Chattanooga, TN ran a simple event and raised $100,000 in less than 48 hours. While crowdfunding has traditionally had a negative reputation, breweries are changing this by implementing their fundraising campaigns into existing marketing and branding initiatives, pitching community investment as an opportunity rather than a crowdfunding-style handout.
Outside of just the marketing piece, you also have full control over your terms. Unlike working with a bank, which sets the terms and offers them to you, you are able to work with our team to figure out the best path to repayment based on your knowledge of the business. Based on your projections and the amount you want to raise, we'll help you determine an appropriate share of revenue, investment multiple, and maturity date. We'll never have you launch on terms that feel too expensive or burdensome, and we'll offer suggestions to make your offering more appealing to investors. We want you to feel confident in understanding how your terms work.
3. Terms are flexible.
The most important reason that we're seeing so many breweries raise funds on Mainvest is that terms align so well with existing capital stacks. Capital raised on Mainvest is structured as debt, not equity, which can be more straightforward and prevents dilution. With a revenue sharing note, you're sharing a percentage of quarterly revenue with investors until they're repaid. Unlike a term loan, with a set interest rate and monthly payments, repayments on the RSN scale with you. For example, if you're taking a step back from sales to pursue a renovation, your repayment on the quarters when sales are lower reflect the decrease in sales. Conversely, if you're doing particularly well, investors can benefit from that success by seeing a larger repayment. During the pandemic, when so many businesses had to suddenly close down operations, the revenue sharing note provided a level of flexibility that many other forms of capital didn't offer- and businesses benefitted from that by being able to pivot effectively and pursue alternative revenue streams. You can learn more about the mechanics of the revenue sharing note here, or contact our team to work 1:1 on terms specific to your projections.