The crowdfunding industry isn’t old enough to have veterans, but it does have experienced players. Frazer Thompson, the chief executive of Chapel Down, is now on his second campaign, raising £1m in return for 5.88 per cent equity on Seedrs to fund a new, state-of-the-art brewery in which the firm will make its Curious Brew beer and cider. Back in 2014, Chapel Down raised £4m from the crowd to grow and improve its existing vineyard operations. This time around, it has already overfunded to £1.4m, with the equity offer up to 7.87 per cent – and there are seven weeks still to go.
At a time of calls for the nascent crowdfunding industry to improve due diligence and accountability to investors, and with campaigning companies’ valuations frequently called into question, I caught up with Thompson to talk about his raise and the industry more widely.
What is it about crowdfunding that so appeals?
People aren’t going to put their money into something they don’t understand. Part of the reason we’ve been so successful is that they do understand beer. English wine and craft beer are really, really exciting places to be right now. The valuations being put on craft breweries are outstanding, and show just how much potential the market sees in those categories. The merger of two of the biggest brewers in the world is creating a vacuum into which craft beers are flooding. The passion that’s been sucked out of brewing is going into this new sector, and we want to play a significant part in that.
We’ve got the experience and a brand that is very distinctive. We’ve found the perfect site for a brewery – just 38 minutes from St Pancras. And crowdfunding can help it happen. We are recruiting an army of pilgrims (our investors) who have an opportunity to come in at this early stage and share in our growth and help us build a bigger, better company.
I get dozens of emails and letters every week from shareholders making suggestions about how to improve the business. Some are useful, some less so – but they’re all positive. All our shareholders share a sense of pride and belonging. Up and down the country, there were hundreds of mini-mes sitting at the dinner table over Christmas boring people to tears about Chapel Down and Curious Brew. Why wouldn’t you want that?
Are you concerned investors are piling in because it’s a trendy market?
No – and it’s an insult to people’s intelligence to suggest that they would. You’ve gone onto the Seedrs website. Everything on there has a risk warning clearly stated. Before you invest you must be aware that you can lose your money. If you’ve got the slightest doubt, you don’t invest. You’ve got all the paperwork to go and see a qualified person, should you wish. You don’t need to be a professional to work out your downside risk. What’s more, if you’ve got investors like Nigel Wray and former S&N and Magners chief executive John Dunsmore investing, you can make a decision on whether to follow their money.
You should be careful, as an investor, of complex structures. The simpler the structure, the better – it doesn’t need to be complicated. Most crowd investors have acute awareness of the product they’re investing in – far more so than most investors. Their knowledge of financial ratios may not be as astute as a professional investor, but they have the advantage of feel. They are people who have invariably drunk our beer, seen other people do so and spoken to their local bar or supermarket about us. Many have talked to me or our people too. That’s an informed decision.
People were up in arms over brewer Brewdog’s valuation. Were they right to be?
Camden Brewery was sold for around about £85m last month. On that basis, £305m for a business like Brewdog doesn’t look silly. Consumers vote with their feet and wallets – that’s free market economics. Anyone can take profits, multiply them by a given amount and say “I’m not paying that”. Or, they can want to be a part of a business that they believe is going to continue to do well and change the way they interact with the brand. Brewdog embodies that very well.
What did you learn from your first raise?
First, to embrace the variety you’ve got as shareholders. We’ve got old ladies who like a bottle of fizz at Christmas and we’ve got institutions like Henderson. You have to learn to live with all of them. One will want to know your debtor days and Ebitda, the other where they can buy a bottle.
Second, you’ve got to get the communication right. Understand who you are trying to reach and be able to articulate what you’re doing in four minutes to enthuse your audience. Don’t insult their intelligence – and do it brilliantly or don’t bother.
Third, choose your partners carefully. We chose Seedrs because it’s rigorous and prioritises protecting investors. It’s also the most likely platform to give us international reach. We were very keen to get America involved. But currently, it doesn’t have equity crowdfunding as we do. If I were a US citizen, I’d be angry. The nannying is ludicrous. Of course we want to keep the sharks out, and a platform needs to provide a professional level of due diligence and enough information for you to be able to make those decisions yourself.
Fourth, if you’re going to crowdfund, you need to be prepared to market the offer hard. People don’t just walk through the door or visit the platform; you have to work hard for your audience before you can wow them.