Triple1Three, parent company of Western Australia’s Otherside Brewing Co., is the latest of a growing number of breweries undertaking crowd-sourced funding (CSF) rounds.
The campaign, launched officially to the public last week and hosted on the Birchal platform, has already raised $877,980.50 from 416 investors at the time of writing, already surpassing its minimum $500,000. Its maximum is set at $2.5 million.
Al Taylor, CEO of Triple1Three, said that they were tracking ahead of expectations, but it’s always nerve-wracking setting a maximum.
“That was part of the challenge, deciding where we set it in terms of our maximum.
“We wanted to make sure that the number and the number of people who could invest were right,” Taylor said.
According to its offer documents, the Triple1Three group made $7.6 million in the year to 30 June 2021, but after sales and employee costs, it made a loss of $323,218. However, the company said it was on track for record sales growth, predicting 20 per cent growth in 2021/22.
The offer values the company at $26.9 million at the maximum range.
Taylor explained that while the valuation of a business might not be the same as would be received in other settings, there was greater appeal in a crowd-sourced funding (CSF) round for other reasons.
“The reason the CSF funding platform is so fantastic is that it’s not like a stock exchange, IPO situation. Investors are mostly participating because they love the brand and they like what you’re doing.
“IPOs on the stock exchange mean that, generally, people are participating because they’re in it purely for a financial outcome. Crowdfunding is different.”
In this respect, investors become a hybrid of shareholder and brand advocate.
“Everyone that is investing is, in a way, a supporter of the brand and the more active advocates we have for the brand the better.
“It 100 per cent speaks very truly to our intention as a business, that it is driven around social connection.”
This is not Otherside’s first foray into creating communities within the business, having already launched its successful Beer Tycoons beer club in 2017.
“Some interesting things happened as a result of the Tycoons, beyond what they bring to the business. When we started it we thought 250 Tycoons and we’ll max it out,” said Taylor.
“We have 900 Tycoons now, and we’re growing by 10 to 25 new Tycoons a month.”
Triple1Three brought the CSF round to the Tycoons prior to its public launch, and it proved to be a success, perhaps the next level for dedicated followers of the brand.
“We told them about the crowdfunding raise, and we had more people turn up for that than some of our experimental releases.
“That’s the really fascinating thing about the spread of people that engage with our business. We had both major craft beer fans and sophisticated investors asking tough questions about strategy and performance, all in the same room, all drinking beers and having a good time.”
One issue which has arisen from companies that have undertaken crowdfunding but then potentially not lived up to expectations is the lack of transparency and communication with new shareholders.
While the Tycoons club may not have been a direct predecessor of the crowdfunding round – the main difference being that Tycoons do not own a share in the business as part of their membership – it did teach Otherside and the wider Triple1Three group about the obligations to dedicated fans.
“We’ve had plenty of time to spend time with people that, whilst not official shareholders, have felt part of the business, and we know that it’s a two-way conversation.
“You can’t just do this [crowdfunding] and then keep doing what you’re doing, you have to stay engaged. With the Tycoons we were able to do that and have proven our capability to stay engaged with them.”
It also helped that Triple1Three also has a number of existing shareholders, so having obligations to multiple shareholders rather than just founding and majority owners is not a new concept to the team.
“We’re also 100 per cent clear on our obligations, we already had shareholders and we already had a programme for staying in touch in a more formal sense, but what I think is important with CSF is that it has to be a different type of engagement.”
While the obligations to shareholders are a major consideration, it also changes the makeup of the business.
“Startups and founders of smaller businesses might not necessarily realise when you move into this territory that it’s everyone’s business. You’ve got to be clear you’re ready for that.
“You’re inviting a lot of people on the journey with you and you have to be comfortable with that.”
Future plans for Otherside
If the maximum is reached, Triple1Three’s plans include spending $1.5 million on venue and brewery expansions or acquisitions, and then smaller amounts including $220,000 in working capital and $100,000 in product development.
“What we want to do with the money is invest in people to increase the sales team, increase people on the ground acquiring tap points and retail points, and we want to increase marketing activity,” Taylor explained.
“There are also lots of opportunities on the east coast that need to be supported, some stuff at the brewery to upgrade from a brewing point of view, and going into different beverage lines.”
Triple1Three has already been adding to its venue portfolio with the acquisition of the majority stake in Mojos earlier this year, as well as a number of other projects.
“Welcome to the Otherside [its pop-up bar brand] has been incredibly successful – we have half a dozen in the pipeline, and we want to put some power behind that and do some more of those.
“We also want to look at a venue north of the river, akin to Myaree [home of Otherside’s The Brewhouse]. What we discovered in Myaree, which is in an old warehouse and not necessarily pretty from the outside, is that it’s what’s on the inside that counts.
“We discovered you don’t need to find something on a high street and spend a fortune, there are places that need something and there are a few locations we’ve identified, where we can take what we’ve done at Myaree and learn from it, even if it’s not on the scale of that from the brewing side.”
But the scale of its plans also depends on the outcome of the crowdfund.
“There’s a bunch of stuff we want to do and the amount we raise will determine how much we can do, but we have a clear plan of the priorities.
“We’ve been in this state, we’ve weathered the storm, we’re still standing and we’re in good shape to go to the next level.”
Listen to the Radio Brews News Valuation Panel to hear more about crowdfunding and how to value a brewery and hospitality business.