When the business first embarked on its crowdfunding mission, a tactic used by an increasing number of consumer-facing young businesses these days, it aimed to raise £300,000. However, after raising that amount in two weeks, the bar was raised and the fundraising was eventually closed at the £406,390 mark – bringing on board 446 investors.
So what goes into achieving such a successful process? Andrew Reeve, co-founder of HonestBrew and beer aficionado, sat down with Real Business to discuss his approach.
The first thing that surprised him, once the pitch was live on Crowdcube, was how many existing customers jumped on board. Within a few hours of being open to investment, £20,000-£30,000 was already banked – great validation going forward, he added.
A big factor in keeping momentum going and converting interested backers was dealing with questions. The kind of queries being fielded varied greatly, due to the diverse people posing them. From executives at big financial houses such as Deloitte to an engineering professional at Facebook, potential investors were interested in dialling down into greater detail on financial predictions, how the model was built, CPAs, different channels and technology.
The HonestBrew model sees subscribers sign up to receive a curated collection of beer each month. With 50 breweries from around the world signed up, HonestBrew also makes the claim that 95 per cent of its drinks are not available in supermarkets. Each mixed crate is put together by the “expert team” at HonestBrew and is “tailored” to match each user’s individual profile.
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To get happy customers on board with the crowdfunding round, Reeve and the team first sent out emails to subscribers and then followed that up with box inserts explaining the company was about to go through the process of raising money.
“When the campaign went live we sent out 150 individually wrapped investor beers asking for backing to help raise the profile. But before all that, we talked to our current investors, and I can say that we’re really excited to have those existing supporters back on board.”
Moving on from there, and conducted throughout the campaign, were investor meet-ups hosted in the brewery where any questions potential investors might have could be dealt with.
“We had about £150,000 from current investors, and if you have existing investors following on it provides great validation for the business. These people sit on our board and it helps tie up a lot of the due diligence,” he explained.
When it came to dealing with the sharing of financials, Reeve said the company had to be careful. Some asking for the business plan don’t have any information on themselves to provide, so he urged starting all potential leads with a pone call – the same as when going about a private round.
“The biggest thing is pre-plan and prepare to work,” he advised. “It’s all about having an execution strategy – two or three months out, before going to the crowd. Then organise a certain amount of investment before going live for validation, them make sure you have a process to keep on top of and manage interested investors.
“The last thing you want to do is not engage, it has to be driven from the business. You can’t expect this to come from the crowdfunding platform.”
Now that the investment round is closed, Reeve plans to put together the collection of 446 investors and then provide regular updates. He’ll be inviting each one to a catch up with the team at least once a year so they can pose questions, with some even having already expressed an interest in helping the company. “We need a process for that as they have awesome experience,” he said.
With £30m having been invested in businesses from the food and beverage sector through the Crowdcube platform, what does Reeve believe will take the business from a crowdfunding hit to a major player in the beer game?
“The big thing we’ve seen is making sure operations can keep up with marketing and customer acquisition. Over the last nine months we’ve moved to a new warehouse as there was an operational constraint at our last one.
“We are quite lucky with our investors as their background is food and beverage. They know that side of the industry, and with my background in project management and engineering we’re quite confident.
“HonestBrew needs to keep delivering what people want. With things like taking on feedback and engaging through events, we want keep that small company feel as we scale quickly.”
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