Wefunder x Hopsters
How a craft brewery used regulation crowdfunding to spark a projected 7X increase in revenue
Lee Cooper knew his business had growth potential. Hopsters, a craft brewery where customers brew their own beer, had recorded $1.3 million in sales in 2015 in a 2,000 sq. ft. facility in Newton, a suburb of Boston. Business was so good, and the model so scaleable, that Cooper knew building a larger facility in Boston proper could boost his profits significantly. This was a pick and shovel business within an established model. All he was missing was the capital.
He tried the bank at first, but couldn’t get nearly enough to build out the new location. Cooper then hired a specialist, agreeing to 10% of the raised funds in exchange for connections to hospitality investors and VCs. The process took months and raised only $400,000, not enough for the full expansion.
Cooper hadn’t heard of regulation crowdfunding, which allows customers and community members to invest in his business, until a friend in the industry sent him a tip. He then went to Wefunder. After exploring all other options, this is the model that worked.
The fee was less than half of what the specialist charged and the process took less time. By the time the deal closed, he’d raised $1.3 million through Wefunder from 720 investors. Then, he was able to go to the bank and receive a better deal on a $750,000 loan, giving him enough total capital to start his expansion plans.
“They obviously wouldn’t have given me that if I didn’t raise the Wefunder money,” Cooper said about the bank. “The best thing about selling equity is that you’re selling someone a piece of your business. The bank doesn’t want your business. They just want the money back.”
This winter, Hopsters is opening their second location in an up-and-coming neighborhood of Boston called Seaport. It’s 3 times as large as the original brewery. Revenue is projected to increase from $1.3 to $9 million as a result, and if everything continues to scale as planned, Hopsters plans to open 16 more locations by 2022.
“Without Wefunder, without this market, I don’t know how I would have got the money,” Cooper said. “I would’ve had to go rob a bank, so it just wouldn’t have happened.”
How Cooper Completed a Successful Campaign
From the beginning of the campaign, Cooper focused on the specific story of his brewery. This seems like a small step, but he found it to be vital to his campaign.
The story that he pitched wasn’t complicated — if you invest in Hopsters, you can own your own piece of a neighborhood brewery.
This is the message he consistently sent out through the campaign. Things like investment videos, community events, and Facebook groups all heard the same idea. Cooper didn’t try to sell the uniqueness of the Hopsters model, or his revenue numbers. He sold the very concept of his campaign. This proved valuable for all of his investors, but particularly for the local ones who frequently visited the bar. This audience proved to be crucial, as the majority of Hopsters investors came from Massachusetts.
Understanding his Knowledge Gaps
Cooper was not a crowdfunding expert when he started his Wefunder campaign and didn’t pretend to be.
“I get a lot of calls saying, ‘Hey, I’m thinking about running a crowdfunding campaign, what made you successful?’ ” Cooper said. “I say, ‘Get yourself a good lawyer. Get yourself a good accountant. Educate yourself. Find out what your story is, put the effort in to make time to sell the crap out of it, and you’ll do well.’ ”
The reason? He knew he would get hundreds of questions from both current and potential investors. Cooper thought nobody would give money to a business led by someone who didn’t know what he was talking about. So he hired the right people and then spent a lot of time figuring out the ins and outs of the process, both of which helped his investment base.
“It was definitely an emotional rollercoaster because we wouldn’t just have been able to open the brewery, and crowdfunding is a great thing, but it was a lot of work,” Cooper said. “I spent some money on legal fees between making sure the subscription agreement makes sense, making sure that I did accounting piece of it. I mean, it’s not easy, but you know what? People were giving me close to $2 million, bank’s giving me close to a million bucks. It shouldn’t be easy.”
Communication During the Campaign Became Key
Cooper talked with investors during his campaign, especially at the brewery, but the real conversations happened online. Every Hopsters investor was invited to a private Facebook group where they were asked three questions: Why did you invest, what can we do better, and how can we get you more involved?
“Everyone’s being inundated with a million different pieces of information these days,” Cooper said. “People prioritize you and give you time as long as you provide a great communication that gets them involved and gives them what they want.”
Cooper had been sending out content to his 15,000 Facebook followers, but also paid to boost ads on the site during the campaign. Eventually, he noticed that a lot of his investment dollars were coming in as a result of those boosts. So he contacted Facebook’s PR team, thinking they would blow him off. Instead, they set up a story with CNBC, who ran a long article on the Hopsters Wefunder campaign.
Cooper estimates that national article brought in $150,000 to the campaign, and it only happened because he asked.
Why Regulation Crowdfunding Proved Superior
Cooper prefers equity over debt for several reasons, but a big one is that his investors are also his customer base. He consistently meets patrons in the brewery who introduce themselves as investors in Hopsters, which he knows is huge for the business.
These customers are the world’s best advertising. They introduce Hopsters to their friends, offices, and social channels, doing the sort of grassroots marketing you just can’t pay for. This is true at the old location, but will be even more important in the new one.
“These are people that are going to speak highly about you, going to give you good feedback, and they’re going to spend the time on supporting the business,” Cooper said. “But they’ll only be as receptive to the time that you put in building a relationship with them.”
There were other advantages to having a customer base as investors, because Hopsters is Cooper’s passion — its success or failures are his own. To have more than 700 people from all over the world invest their own money into his idea was something no less than extraordinary.
“When I hit that million dollars there was so much … not anxiety, but there was so much build up and so much tension about getting that,” Cooper said. “When I hit that million dollars, I remember like it was yesterday, but I’m sitting in my office and I saw it hit a million bucks, I closed the door, and I cried. I don’t cry, I never cry, but I had a five minute moment there.”