Scottish brewer BrewDog’s has an interesting way for fans of their beer to become more involved in the quickly growing company. [I for one welcome our new BrewDog’s overlords.] They call it “Equity for Punks” and it allows passionate fans of their beer to literally invest in the company. For even a small fee fans of the brewery can literally purchase a part of the business. Not only do you become a card carrying member of the BrewDog’s investors you get access to special “owner” events, discounts, early access to new and rare beers, and most importantly you get to vote on the direction of what the brewery is doing.
In 2010 when the brewery floated this as a pilot program to gauge public interest they had over 6000 people subscribe to own a little chunk of their rapidly expanding empire. The brewery got a sizable increase in capital to invest in the projects that the company wanted to work on and happy fans of the brewery got to feel, got to be part of the brewery and bars they so obviously enjoyed.
Sadly this unique avenue for grooming investment capital in American is not a viable option. In American companies that have not gone public can really only sell equity to high net worth individuals. If you have a few million dollars to your name and you can invest in your local microbrewery. If you have a hundred dollars or so you want to invest in your local brewpub you can forget it. Your pathetic self-worth (both fiscally and mentally) are irrelevant to the USA’s legal investment framework.
Yet it seems that this may not be the case for much longer. Title III of the 2012 JOBS (Jumpstart Our Business Startups) Act allowed for the public to receive company equity in exchange for funding. This essentially overturned earlier legal precedent and would allow the average American the ability to invest in private businesses. Unfortunately the passage of this bill didn’t immediately open this area of investment to breweries. Title III of Section 4(a)(6) requires SEC approval before becoming official law.
Thankfully, last Wednesday the SEC voted unanimously to pass this proposed rule. Thus becoming one step closer to overturning 80 years of established financial practice. The SEC must pass a final rule after allowing public feedback and a reevaluation after public discussion which is expected to occur in early 2014. While the SEC’s rule proposal is a daunting 585-page rule some of the highlights of the new restrictions are:
- The maximum an investor with income or net worth less than $100,00 could invest is $5000; investors making more could invest 10% of income/net worth up to $100,000;
- Companies are required to provide disclosures, including income-tax returns or financial statements and annual operating results
- Companies raising more than $500,000 are required to have their financials audited
- Raises must be conducted through a broker dealer or “funding portal”
These are regulations that are in place to protect and inform those looking to invest. While I may want local breweries to success to the point of wanting to invest in them personally it is important that I have access to the relevant information to make sure that my investment is going toward the growth and success of the company and not the pockets of the private owner(s).
This change prompted the creation of CraftFund LLC which aims to be thee default portal for crowd funding of beer and food companies. The site attempts to match passionate fans looking to invest with craft beer and food companies looking for investors. As of today thirty-three breweries have signed up ready for the seemingly inevitable deluge of investor money once the ruling is finalized and passed.
While the prospect of owning part of your favorite craft breweries is exciting for me I’m not sure it is something most craft advocates would enjoy. Would you invest in your favorite craft brewery if given the chance?