Both Camden Town Brewery and more recently BrewDog have announced or raised funding through crowdfunding – the latter seeking a further £25 million through its record-breaking crowdfunding scheme called Equity for Punks.
A host of other hospitality and foodservice businesses have already used crowdfunding to raise the funds they need to launch or expand their businesses, to the extent that it is now seriously challenging the ‘traditional’ funding organisations, such as banks.
Perhaps the most successful crowdfunding exercise was that of Bournemouth Football Club: back in 1999, the club raised the funds from supporters and friends that kept it in existence. With promotion to the Premier League now secured, the club is apparently guaranteed around £162 million in payments, even if relegated next season – and more if it stays up. Success by any measure!
Such a tale of ‘rags to riches’ is, of course, the dream for both the businesses and the private individuals who are now so willing to invest in the equity capital being offered. Low interest rates on savings, as well as the low dividends offered by many public companies, have also encouraged investors to look to the opportunities offered by crowdfunding.
Hospitality and Catering sector statistics
Crowdcube is one of the leading crowdfunding operators, and identifies the Hospitality and Catering sector as one of its top 5, attracting:
- Over £21.2million invested in funded businesses from this sector
- 62 businesses from this sector have funded on Crowdcube since it launched in 2011
- The average amount raised by businesses in this sector is £409,000
- The average amount invested in businesses in this sector is £2,063
Across Crowdcube as a whole:
- 230 businesses have been funded to date
- Over £78.2m has been invested through Crowdcube
- There is an Investor Community of more than 160,000 people
Proven route to finance
It’s clear, therefore, that both investors and businesses are attracted by the crowdfunding proposition. Luke Lang, Co-founder of Crowdcube points out:
“Crowdcube is a proven route to finance for businesses in the hospitality and catering sector, with 62 of the 229 businesses to fund on Crowdcube operating in that industry.
“We’re also seeing the range of businesses turning to crowdfunding is becoming more diverse; from start-ups like The Pressery, which produces a range of almond milk drinks, seeking seed-stage investment, to established brands like River Cottage, raising £1 million in growth capital to open more canteens across the south of England.
“With so much on offer to investors it’s of little surprise that it’s one of the most popular sectors, attracting more than £21.2m in investment from our crowd of 160,000 investors.”
In reality…
Investing is a risky business, and there are no guarantees
- Under 50% of businesses seeking crowdfunding investment are successful in raising the funding they seek: investors have not been convinced
- Of those that successfully attract investment, it’s still too early to know how many succeed as businesses, and become a profitable investment
- And – witness recent criticisms of the valuations that both Camden Town and BrewDog placed upon their businesses – too little equity may be offered for the investment being offered.
For hospitality businesses seeking funding, however, there’s no doubt that crowdfunding offers a genuine opportunity to (try to) raise the money that will launch or expand your business, and that there will be many more such businesses using this route in the years ahead.
To find out more about Crowdcube click here and access more statistics in their infographic here
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