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Corner Brewery owner says business's $75K crowdfunding effort not a money grab

posted Sep 19, 2014, 1:05 AM by J Shaw   [ updated Sep 19, 2014, 1:05 AM ]
Rene Greff wants people to know that when small businesses turn to crowdfunding campaigns like Kickstarter and Indiegogo as a source for financing projects, it's not an attempt at a money grab, and it doesn't mean that the business is going broke.

Worldwide, crowdfunding generated more than $5.1 billion in funds for public, private and nonprofit ventures last year versus $2.7 billion in 2012.

Locally, millions of dollars have been raised for businesses -- like Avegant and The Lunch Room -- and causes, like supporting a U-M's first Muslim Chaplain and producing a musical for a nonprofit.

"When businesses crowd fund, they're selling a product. They are essentially offering great deals or exclusive offers to try and raise a large amount of revenue in a short amount of time," she said.

And that's what Greff is doing as the proprietor of the Arbor Brewing Company Microbrewery, formerly The Corner Brewery.

She's trying to raise $75,000 on Indiegogo in order to enclose and expand ABC Microbrewery's kitchen at 720 Norris Street in Ypsilanti.

The plan is to put in a hood system and fryers, install an Italian wood-fired pizza oven for making pizzas and home-baked breads, and to install a dishwasher so the business can stop using disposables. Greff, who also owns Arbor Brewing Company in Ann Arbor, also wants to add a new ice machine.

Different donation levels will get a contributor things like a brick with his or her name and hometown on it; a two-year membership in the mug club, which provides discounts and other benefits; a custom stein; $1 off beers and growler fills; and free admission to monthly beer release parties; For a $2,500 contribution, a customer can get 12 cases of a sour beer made to his specifications with a private, custom label.

"I think the positives are if you are launching a new product, crowdsourcing is a great way to gauge the response for a new product, treating it sort of like a test market. If you fail to meet your goal, it's probably not best to invest $1 million," Greff said.

"It's also a good way to capitalize on social media to market your business or product, and, obviously, if you raise the funds needed, that's a positive, too."

But there are some drawbacks and potentially negative consequences that come along with crowdfunding efforts, and Greff found that out first hand early on in her campaign.

On the morning of Aug. 12, Greff awoke to a Facebook message from someone she didn't know – a fellow Ypsilanti business owner.

In the message, the other business owner accused Greff of trying to "pan handle the community, while real people sit and work for money."

"People assume that small businesses are rolling in cash, and that's just not the case. It's funny that I still underestimate the abilities of haters to hate, and I have to get past that, but I haven't quite gotten there yet," Greff said.

"What we've learned from this is that you need to make sure your crowdfunding messaging is clear – what's in it for the people, why you chose that route, what you hope to accomplish. I think we were just very naïve from the start in thinking people understood what we were doing. If I could go back and do it all over, I would've made it clear that we're not a nonprofit and we're not asking for a donation. We're selling cool stuff."

And the business isn't in bad shape, Greff said. In her Facebook post, she mentioned that she's had to make personal loans to ABC Microbrewery in excess of $100,000 in order to to buy kegs and make payroll during the slow winter months, and that ABC Microbrewery is "tapped."

The debt, she explained, is part of the necessary growth process. In order to grow, you have to invest in your business, she said.

She said that both businesses are doing fine, but the difference between small businesses and corporations is that the small entrepreneur "doesn't have a couple hundred thousand dollars lying around to put into projects."

"It's not at all the type of debt that would put a hamper on business. We've never been late on a loan payment or anything like that. It's not unexpected debt," Greff said.

"We are growing rapidly, distribution is up 35 percent this year, just in Michigan alone, and in a couple weeks we're going to launch in out-of-state markets. Our focus is responsible, measured growth, and the kitchen is the next step in that growth."

This was the second time Greff has turned to crowdfunding, but the first time was when it wasn't as ubiquitous or as easy as going to the Internet.

After securing a million-dollar loan – 90 percent of which was debt and 10 percent equity from private investors – from a bank in 2006 to open The Corner Brewery she used crowfunding as a way to get the community involved in the business.

"(In 2006) we made a play on the traditional nonprofit funding approach by creating different giving levels ... to basically get people involved. We had all of the financing we needed to get started, but it was really (public relations) and community building, and again, selling a cool product," she said.

"I think for people who are paying attention and who know we're doing a campaign, this time has definitely positive. We've gotten (almost 300) contributors so far. A year from now people won't even remember we did it, they'll just know we have this new, awesome kitchen."

The campaign has almost reached its goal with just a couple of days to go. As of Sept. 17, the campaign had raised more than $74,000.

She said the lofty goal might have alluded to her overconfidence as an entrepreneur, but said that sort of self-belief is necessary in order to be successful in business ownership.

"We were overconfident, which is the curse of the entrepreneur. As is my way, I was overconfident. You can't be an entrepreneur if you're not confident," Greff said.

Cash flow wise, things are going great and it's been a while since the Greffs have had to put in any personal money into the business, she said, but they also haven't been getting paid back yet, either. That's something she said is also normal with small businesses.

Ann Arbor business owners like Paul Saginaw and Ari Weinzweig – owners of Zingerman's – and restaurateur Sava Lelcaj have said that at times, their larger businesses have had to shoulder the financial burden of their small businesses until they become financially independent.

"I think a lot of small businesses can benefit knowing that other businesses have gone through struggles," Greff said.

"For any business to imagine coming up with an extra $100,000 to spend on anything is a strain. That debt is basically growth, and the thing about growth is that you have to invest in it before it happens."

She hopes the continued investment into the business lets people know that ABC Microbrewery is going to be a mainstay in the community for a long time.

Greff added: "The important thing is that we will never leave that location. We have no goal of being the next Arcadia (Brewing Company in Battle Creek) or the next Founders (Brewing Company in Grand Rapids). Where we are in our little corner of Ypsi is where we plan to stay."

Posted from : http://www.mlive.com/business/ann-arbor/index.ssf/2014/09/crowdfunding_effort_for_ypsila.html