GrowthBusiness quizzes the company’s founder, James Yeoman, to find out how the process went and just why the micro brewery craze has taken off in the capital.
Despite thinking that he may have missed out on the opportunity to launch his own brewery, entrepreneur James Yeoman has just raised £58,300 to open up in the Royal Arsenal area of Woolwich in London.
Yeoman will be using the money, which has come from 70 investors, to purchase a ten barrel brewing system as well as renting space for the business.
On top of creating 3,000 litres of beer a week and supplying local pubs, Hop Stuff Brewery is also planning to take its product to music festivals and events in 2014.
GrowthBusiness has sat down with Yeomans to discover why he became so interested in beer, and what goes into a successful crowdfunding pitch.
(1) How did you become interested in making beer?
Drinking too much of it is the simple answer. I’ve always been ale fan, and quite keen to try something different. I, along with a lot of others out there, are fed up with being offered Peroni or Fosters or Heineken – the repetitiveness of it is not fun, you just drink it out of social convention. I then started home brewing like most other people in my space.
(2) What inspired you to set up a brewery?
It has been a niggling ambition for a while, it’s been in the background for a year or two, but I never really had confidence to go for it. I started looking at ways of financing it and that kind of led me to put it to bed a little bit as we couldn’t get capital from traditional means like banks. Unfortunately, it’s not 2007 anymore – you can’t get loans on that kind of basis.
(3) What funding options did you consider?
We also looked at venture capital and other aggressive means of financing – some of the more ‘professional means’. I mean that in the nicest way as I think VC has place in the market, and is very useful for start-up businesses, but we wanted to give equity away to people who were passionate, not those thinking about an exit. This is particularly the case when you are producing a consumer product and need to be thinking about quality control. If your sole drive is reducing costs and make more then you run the chance of not being as popular you might wish.
(4) What was the draw of crowdfunding?
My girlfriend was the one who alerted me to it actually. We looked at non-equity offerings like Kickstarter, but sums there tend to be much smaller. We then came across the equity side of it and, for me, it was a way of allowing everyone to get involved in it.
Whether you’re a £10,000 investor, or my sister who bought one share for £10, everyone is able to get involved. With us being located in Arsenal and Greenwich, it is crucial for us to get locals on board. For investor A, B or C to be able to walk in and get one of our pints at a local pub is great and is the main selling point for me. Crowdcube also do a good job of hand holding to make sure you know what you are getting into. They answered all of my stupid question when I had them and made the fundraising process very approachable and easy.
(5) How much time did you take on your pitch?
I’m not a massive sleeper anyway and am actually still working at the moment. Because of that, everything has been done on the side – often at 3am in the morning. We’ve put more time into financials than anything else as that is what most people look at. We built our little cash flow model and did it in a scientific and methodic way that took us 6-8 weeks. The investor presentation itself was a couple of weeks and then a few evenings on the video. So it probably took us three months from deciding to do it, to being live.
(6) Did you have any investors ready to go at the start, and how quickly did the pitch get moving?
We didn’t have that much investment ready at the start but I did have a few people who were in for a couple of thousand each. We were then able to hit about £8,000 in 48 hours. I bent over backwards to make myself available to for calls and emails – meeting with 2-3 investors a week. The day we closed I was on the phone to one for an hour, and he was the one who closed the whole round with one massive investment.
I also went up to my little brother’s leavers ball to gave away a few samples and ask for donations to cover the micro brewing we’ve been doing. As chance would have it, one of the guys we met there on the Friday evening invested £5,000 by Monday. I would encourage anyone looking to do something like this with consumer goods to get out there and introduce it to as many people as you can. We went to post office and shipped out as many bottles as I could. If you’re answering questions immediately via the phone or emails it shows that you are really involved. If you leave something for a week investors will lose interest.
More on crowdfunding:
- Crowdcube inks FSA authorisation as it looks to build on surge
- UK crowdfunding institutions unite to create regulatory body
- CrowdBnk’s attempt to bridge the crowdfunding divide
(7) Why has there been a sudden surge of micro breweries and craft beer in London?
I think the the closure of the Youngs’ Ram brewery in 2006 encouraged others to open up and grow. People are getting a bit fed up with lager, and that isn’t going to change any time soon. These new small breweries can turn enough to provide an income for three, four or five people easily and there has been a big return to local goods, residents basically supporting their own borough.
We questioned whether we’d missed the surge but identified that our borough and core target markets were still undersupplied. The South East of London doesn’t have as many, compared to East London and north of the river where there are lots.
(8) Would you go back to crowdfunding again to get more capital?
There is a dilution issue now going forward. We wouldn’t just raise funds for the sake of it, there would have to be target in mind – like upscaling the business. Then we need the consent of existing shareholders. Although, if we reach that stage, the individual shareholders will have done so well they won’t mind dilution for extra money.
We have split A shares and B shares, with anything over £1,000 classified as A shareholders with voting rights. This makes it easier when there are big issues. People deserve a right to speak, but when it comes to making the decisions and being reactive the splitting of the voting rights makes it simpler for us to go about our business. It also cuts down on a heck of an amount of paperwork.
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