Amy Johnson and her two partners wanted to open a restaurant and brewpub in Minneapolis. They wanted to open the Northbound Smokehouse & Brewpub but needed to raise $220,000 to be able to get a bank loan to help fund their new venture.
Normally this type of shortfall would be the death knell of those looking to start their own business. Yet Amy Johnson decided to crowd source the raising of almost quarter million dollars. But unlike the increasingly popular method of hitting up Kickstarter to get your fans to invest in your dream Johnson decided to go a more unconventional route.
Johnson got a new idea when talking to friends and family who wanted to help but didn’t have much more than a thousand dollars to invest in her idea. Johnson remembers, “They were like, ‘I’ve got a few grand, but I don’t have too much money.’ And people kept saying this over and over and we latched onto the idea. Why not just take a couple grand from everybody and then we’d have the money we’d need?”
Johnson and her partners just didn’t want to take people’s hard earned money and run, they wanted to give something back for such a generous offer and they decided on free in-house beer for the rest of their lives.
Northbound has been running successfully for two years now due to this model of investment. They quickly found several supporters who chose to get free beer for life or get a small nonvoting equity in the company for their investments.
The model is essentially Kickstarter without Kickstarter’s restriction on not allowing those seeking contributions to provide alcohol as an incentive. The model has done so well for Northbound that it inspired a coffee shop in St. Paul looking to revitalize its business. It went from hemorrhaging cash to earning eight times the daily profit by offering a free pint, glass of wine, or cup of coffee per day to investors for free for their lifetime.
Skeptics have objected to this model claiming that a business cannot turn a profit if it is giving away its product for free but Northbound reports that their investors didn’t drink them dry. They give away an average of 17 beers a day which costs them $0.40 per beer. Plus they know their investors and showing up to the bar alone, they are cheerleaders who encourage people to visit the shop and pay for their beers. In a very clever way they have turned their investors into walking billboards. For $0.40 a glass whenever investors are at the brewpub seems cheap for someone who is going to encourage more business for you.
This might become a new model to help businesses get another start with investment money or to help local businesses get off the ground in the first place. The question will be if the success stories outweigh the failures.
All I know is that if I could drink for free at my favorite local brewery for a single $1000 investment it seems like a no brainer. And I have to imagine that a lot of local drinkers would have to agree.