You may or may not like the beer that James Watt makes at BrewDog, Scotland’s largest independent brewer. What you can’t deny, however, is that his company is the toast of the UK’s alternative finance sector, having just raised more money through crowdfunding than any other business on record. Earlier today, BrewDog announced it has taken £4.25 million from investors in just six months through the latest trance of its “Equity for Punks” scheme, an innovative crowdfunding model that has proved hugely popular with investors.
Don't Miss: See the first leaked Black Friday 2016 Ad
This popularity could have something to do with the fact that investors in BrewDog shares qualify for a lifetime discount in its bars and its online shop. But Watt insists they won’t be left nursing a financial hangover. BrewDog is now the UK’s fastest growing food and drinks brand according to the Sunday Times Fasttrack survey, and has grown sales at an annualised rate of 167 per cent over the past five years.
“The phenomenal success of Equity for Punks has proven how much our customers believe in our mission to make people more passionate about beer,” Watt says. “The company is already valued at over three times the value it was given during the last Equity for Punks scheme in 2011, it employs 200 staff, is on track to turnover £19 million in 2013 and the strong growth is to forecast to continue into 2014.”
Overall, Equity for Punks has raised £7 million for BrewDog over the past four years, from three separate fund-raising issues. This latest instalment saw £1m raised in the first 24 hours after its launch, and the offer closed a month early with the company raising £250,000 more than it had originally hoped for.
That success is all the more remarkable given that BrewDog has eschewed Britain’s crowdfunding platforms, preferring to appeal direct to investors (which hugely reduces the cost of the exercise). Watt depends on the loyalty of his business’s customers as well as bold marketing – BrewDog launched this latest issue, for example, by driving a tank round the Bank of England.
Despite going it alone, however, Watt believes the success of the fundraising exercise underlines the strength of the UK’s nascent crowdfunding scene.
“We have continuously displayed that crowdfunding has become a worthwhile and innovative means for business growth,” he says. “The mental shackles that have tied down British small and medium enterprises to the staid and unimaginative traditional methods of raising funds have been untethered… crowdfunding is no longer just a fad or buzzword, it is a legitimate alternative financial system.”
Nevertheless, Watt expects to see other companies follow BrewDog’s example by launching their own schemes, rather than appealing to the audiences of crowdfunding platforms such as Seedrs and Crowdcube, which serve as hosts for similar offers from a growing number of smaller businesses.
Whether others will have sufficient customer loyalty and marketing nous to pull off the trick remains to be seen, however. It is certainly difficult to imagine a start-up business with no brand to speak of being able to go direct in this way.
But there are some precedents. For example, King of Shaves, the company that makes male grooming products, raised £5m in a bond issues a couple of years ago – it too chose to market direct to investors, rather than through a platform.
The rise of these issues will be a fascinating trend to watch. Crowdfunding is an example of disintermediation: it cuts out the middleman – the banking industry – that typically sits between investors and their backers. BrewDog’s scheme, however, takes the concept one step forward, disintermediating the disintermediator. Watch this space.
Don't Miss: The Best HDR TVs