(Screenshot via YouTube)
Equity crowdfunding, the idea that regular people can give money to a startup in exchange for a sliver of equity in the company, is having its first significant success in Brooklyn at the moment.
The company is Barrow’s Intense, and it has raised more than $100,000 from more than 300 small investors through the site Wefunder. Based in Industry City, the company distills ginger liqueur.
Barrow’s Intense, which is currently in 217 bars and restaurants, mostly in the New York area, says it wants to be the Sam Adams of craft liquor. With revenue of more than $500,000 last year, it was looking to raise up to $100,000 at a $4 million valuation, a level it has now surpassed.
“Investing in a startup is Intense,” the company said (capitalization theirs). “Up until now only the very wealthy could partake. We’re thrilled we can now have the people who helped us grow our company share in our success. You’ve seen all our accolades and the strong market penetration we’ve achieved in three short years. Just imagine what we can do moving forward with your help.”
Crowdfunding on Kickstarter has been hugely successful for many businesses. A Williamsburg knife maker raised more than $300,000 with the promise of knives when they’re eventually made. This model has been replicated plenty of times on Kickstarter. What are basically pre-sales that help companies get the capital to go make the product. And crowdfunding can help small companies build a loyal base of customers who were in it from the beginning. But you could never actually own part of the company, just what they sold.
— Tom Critchlow (@tomcritchlow) September 7, 2016
On May 16 of this year, the provision of the JOBS Act that allowed equity crowdfunding for normal people. Bob Pisani at CNBC described it this way: “The law will allow individuals to invest in start-ups regardless of their income or net worth, though there will be limits on how much can be invested. I’ve described it as Kickstarter for non-public companies, but that’s not quite what happens. When you invest in a Kickstarter project, you don’t have equity in the company. With equity crowdfunding, you do. You have an ownership stake, with a share of the profits.”
Will this be the way of investing in the future?
Can startups skip the venture capital circuit and go direct to the public for funding?
We’ll keep an eye on Barrow’s Intense and report back. It is sure not to be the only experiment in this.