Learn more about Mainvest.
Despite some setbacks in 2020 due to COVID-19, the craft beer industry continues to grow. However, this growth is not only being fueled by consumer behavior alone- investment in the industry by retail investors has also grown. Craft beer is a $22.2 billion industry comprised of 8,764 unique competitors. In 2020 alone, 716 craft breweries opened their doors to the public… and this was a slow year. While some naysayers claim that the industry is becoming oversaturated, small brands continue to bring new, interesting products and community-driven tap rooms to neighborhoods around the country with solid success. And thanks to new funding models, supporters can not only fuel the industry by buying beer, but by investing in new concepts.
Opening investment to craft beer supporters
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, including small businesses and breweries. This vastly expands the ability for everyday people to invest in businesses they care about and frequent.
Mainvest, an investment platform specializing in the craft beer industry, has seen massive growth in both the number of breweries raising capital using their revenue sharing model and in the number of everyday investors joining the industry. More than $7 million was raised by community investors in 2020 alone for craft brewery projects around the country. Both experienced and first-time investors have chosen Mainvest to invest in craft breweries because it opens up investment opportunities to everyone. With targeted returns of 1.5x-2x, on average, it can be a method of diversifying into an alternative asset class that investors can actually care about and experience firsthand. It also gives craft beer supporters the chance to get to know their local brewers better by engaging in their capital raise and accessing perks like membership to beer clubs.
Why breweries raise capital through revenue sharing notes
More breweries than ever before are turning to crowdfunding- rather than institutional capital alone- to fund their craft beer ventures. Investment crowdfunding can take a variety of forms. Some breweries use equity crowdfunding, in which they share a percentage of the business in exchange for investment capital from investors. Other breweries may crowdfund loans or use other forms of crowdsourced debt.
Through Mainvest, both established and aspiring brewers can secure a round of funding from community supporters and fans. Using Revenue Sharing Notes, breweries can raise funds from both accredited and non-accredited investors and repay with a percentage of revenue rather than a set interest rate. One main reason breweries choose Mainvest over institutional financing is the community engagement aspect of fundraising. Through Mainvest, breweries can accept investment from anyone in their community, regardless of wealth, status or experience. By providing financial incentives, they improve brand loyalty and reward regulars for their support.
Capital raised on Mainvest tends to be founder-friendly, and repayment is tied to quarterly revenue, not a set interest rate, so issuers repay investors as they grow. A major upside is that issuers decide on the terms of their revenue sharing note. Because it’s a debt instrument, there’s no dilution of ownership. They don’t require personal guarantees, so brewers don’t have to put their own finances on the line to grow the business.
Brockton Beer Co: communities coming together to create new breweries
In Brockton, MA, a group of friends began brewing in collaboration with other breweries. They struggled to access capital from institutional lenders because banks believed that the Brockton community wasn’t the right demographic for a craft brewery. Their Mainvest raise proved otherwise: Brockton Beer Company raised over $100,000 from everyday supporters in and around Brockton who believed in bringing their vision to life. Investments ranged from $100 to $10,000+ and allowed the team to access additional financing to start building out a craft brewery in downtown Brockton. The craft beer industry is expanding, and as more and more consumers demand the craft beer taproom model, options for investment are expanding as well.
Visit the Mainvest website to learn more.