Sites like indiegogo and Kickstarter have truly changed the way that marketing and commerce work in today’s marketplace. You can float ideas and see if they’re good or bad. You can test whether people believe what you believe. And ultimately, you can create cash without giving up any equity.
Let’s review that last point one more time.
Business has changed in 2016. Companies can be given valuations of more than $100 million before they ever launch. Last year, Snapchat was recently valued at $16 BILLION (with a B) with a mere $100 million in revenue. That’s a revenue multiplier of 160 times! Wow. While that’s a crazy trend, what is also interesting is companies who are raising money without giving away any equity.
It is a great way to sell an unproven product. Check out the Kickstarter Coolest Cooler. Sure, the company got great press, but it later backfired on them as they weren’t able to launch the product on time. It didn’t help when they started servicing new (full retail paying) customers before their loyalist Kickstarters. It’s a careful game, and I believe the beer industry needs to think about it.
There are marketing experts who believe that the majority of successful Kickstarter campaigns are spending as much money promoting the campaign as the amount of profit they’re draw from it. Generally speaking, this might be true, and it’ certainly worth considering.
I recently saw a new Beer Connect product online. They missed the mark. Not only was their marketing campaign (they didn’t come out of the gates firing), but the value is off. You want me to contribute $29 for a branded hat (on a brand I have no emotion for)? Come on, guys. There are a couple key mistakes happening here…
- Value. Where is it?
- Chatter. Because after 2 days you raised $300 (out of a lofty $100k goal), don’t expect anyone to care. Spend $10k on marketing to launch this campaign successfully.
- Unless you are highly community based, I don’t think crowdfunding is for the service businesses.
Bottom line: Put your own money into it, like every other entrepreneur has in the past. Or borrow it. Put some skin in the game, but don’t expect to launch a company and give people your branded products to fund it.
Same thing with Celis Brewery, a brand I love, and probably my first craft beer memory. They are trying to raise almost half a million dollars. Last I checked, Atwater Brewing had deep pockets. And instead of a cool Celis t-shirt, you’re telling me for $75 I can get a handwritten note and a keychain? If Celils gets us to pay $450,000 for their equipment, will we get distributions on profit in the future?
At some point, there is something beautiful about crowdfunding.
If you want open a tasting room in your neighborhood, do you have the backers? Is there a reason I should care and want to contribute? Are you doing something different, something sustainable? Will contributors feel ownership, and if so, how? Do you have a marketing plan to launch this thing into the stratosphere? Are you ready to hit up every last person in your database because you care so much about your tasting room?
If so, and if you can add in value for contributors, then go for it. But remember, there is no such thing as a free lunch.