When it came to raising finance in order to expand, Brewdog took the unprecedented action of skipping VCs, crowdfunding or angel investment, and went straight to their customers. Here’s how they leveraged their customers’ passion for their product in order to move to bigger and better things.
“The UK beer scene was much different in 2007,” said co-founder James Watt. “It was dominated by big companies that created bland fizzy lagers. We wanted to put the craftsmanship back into beer.”
In 2009, after building a solid reputation and a base of hardcore fans, they needed more capital in order to move forward. But they decided, rather than the traditional routes of gaining investment, to ask customers to invest in the company instead – and the Equity for Punks scheme was born. Brewdog gambled its entire future on making it work, but it was a gamble that paid off – 42,000 people have invested. Their connection goes deeper than traditional investors too – these are super-fans, ambassadors for the brand who buy the beer and ask their friends to do the same. That connection and passion for the product is the key, and Brewdog return this by consulting with investors on subjects such as new beer flavours, and retail sites. It’s a whole new business model for consumer-facing businesses.
Equity for Punks was the most successful equity crowdfunding campaign ever, raising an incredible £19m by the time of the campaign’s end in April 2016. They’re now about to launch Equity for Punks USA.
Why harness people power?
Getting capital for your business usually involves a degree of compromise, with investors taking equity or setting the terms. However, by giving the equity to people who love beer as much as the Brewdog team do, it makes the whole process more democratic and rewarding.
In order to build this new business model that shortens the distance between the company and community, it was important first to build the community. Equity for Punks wouldn’t have been such a roaring success if it wasn’t for the fans that Brewdog had amassed due to its commitment to exciting beers and connecting with customers.
How it works
Rather than using a crowdfunding platform and giving away a percentage of the money raised to the platform, the Brewdog team decided to manage the crowdfunding themselves, giving them more control over the process and what can be offered. Investors in Equity for Punks get benefits such as a lifetime discount in bars and online, invites to Area General Meetings, and more. People have a say in how the business is run, and investors are able to sell their shares online every six months if they would like to.
Don’t give up
Launching this new approach wasn’t easy. James was told by six different legal companies that it was impossible, but he kept pushing it. When they were turned down for a bank loan in earlier days, in order to buy equipment, they approached a different bank and asked them to match the deal that the other bank had turned them down for. A sneaky move – James joked that their initial business plan was, “Make hoppy beers and lie to banks” – but it clearly paid off.
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