How can crowdfunding be used to help grow businesses?

By Rebecca Weller

- Last updated on GMT

Research and honesty: how can crowdfunding be used to help grow businesses? (pictured: Seven Bro7hers founders)
Research and honesty: how can crowdfunding be used to help grow businesses? (pictured: Seven Bro7hers founders)

Related tags Manchester Finance Brewery

Research and honesty are key to success when crowdfunding, Seven Bro7hers co-founder and co-owner Keith McAvoy told The Morning Advertiser.

Earlier this month the Manchester-based brewery launched its fourth round of crowdfunding with a view to raise £500,000 to expand the business, having raised more than £1m through previous efforts.

However, McAvoy advised operators looking to start their crowdfunding journey need to do “thorough homework” and be honest with investors.

“Make sure you surround yourself with individuals who have previously done this. We found you really have to immerse yourself in the process.

“Every single penny has been reinvested back into the company to allow us to get to the current stage we're at. It's been it's been a successful method.

“[But you need to be] open and transparent and make sure you use those funds for what you're saying they will be used for”, he said.

Crowdfunding is the practice of subsidising a project or venture by raising money from a large number of people who each contribute different amounts, typically online, to support and invest in individuals and businesses.

The founder and owner added businesses looking to crowdfund also need to “illustrate” to investors that they had done their research and understand the market.

He said: “[Crowdfunding] isn't a situation where you can just rock up and people will flock to you. It’s not an easy win by any stretch.

Triple whammy 

“It is a challenge but if done correctly and you embrace the community that comes to support you, then you stand a better chance of being successful.”

However, despite the difficulties faced by any hospitality businesses in the current climate, McAvoy warned against firms using crowdfunding as a business saviour.

“Businesses have had a really difficult time with triple whammy of Brexit, then the pandemic, utility prices soaring and the cost of raw materials increasing across the board. That's really difficult to navigate.

“If businesses are using this kind of funding for rescue purposes, it is probably not the best method or the best thing to do.”

McAvoy added the Government “could do more to help” businesses in “unbelievable situations”, including being forced to take out loans to “survive” over the pandemic.

“A deferment of those repayments, cuts to interest and business rates, support with utility costs and VAT, those would certainly help.

“There's still plenty to do, not just from central Government from a local government aspect as well.”

Another challenge with crowdfunding was managing investor engagement and interest, both during and after fundraising, McAvoy added.

Economic climate 

He said: “The way the way the process works is that you have to do a lot of work on yourselves as a company to attract and interest people in what you're doing and to get involved.

“Then once it goes live, that's when you have got to be swift with things because people's appetite might change week by week or month by month with the current economic situation.”

“Even after success, it still has its challenges with navigating anything that comes your way. It's a responsibility that shouldn't be taken lightly.

“Consumers are conscious of what's going on with the economic climate and they're choosing their spending very wisely.”

The Seven Bro7hers brewery was founded in 2014 by McAvoy and his brothers, Guy, Keith, Luke, Daniel, Nathan, Kit, and Greg, inspired by their dad’s home-brewing efforts in their cellar at home.

To keep up with growing demand, the business started this round of crowdfunding to help fund bigger premises to up production for both the brewing and distilling arms of the brand.

Huge aspirations 

McAvoy continued: “Everything that we do and every other success we have in the on or off trade has a direct impact on the brewery and that's something we're always mindful of, beingable to keep up with demand.

“We’ve got huge aspirations to be able to supply craft beer to the whole of the country consistently and beyond our shores as well through the manufacturing and retail arms of our business.

“But, as you grow and get bigger, bottlenecks can appear with the equipment you have.

“For instance, on the packaging side of the brewing process, we need to be quicker, that means kegging equipment and a larger canning line as well to help us keep up with growing demand.”

As well as enabling businesses to expand from a manufacturing point of view, crowdfunding can also help with brand awareness, according to McAvoy.

He added: “Not only do we get the funds to carry on progressing and growing, but we also end up with a lot more individuals who become our greatest advocates.

“They get involved, shout about us from the highest rooftops and obviously love the brand.

Move forward 

“You also see a savvier investor as well, who are usually really keen to see your progress, so it's a great way of companies like ourselves to [raise awareness] and get the funds needed to grow.”

Thanks to crowdfunding, the firm’s growth plans were also predicted to create a further three jobs at the current Seven Bro7hers brewery site in Salford, which has been in operation since 2017.

McAvoy added: “There are many reasons for needing extra funding for growth, that aspect of the manufacturing side of the business is one of them, and as we bring in the new equipment that will generate more jobs as well.”

Additionally, Seven Bro7hers is also looking to open two new bars in Manchester city centre, which has the potential to create 60 new jobs in the local area.

“We put quite a lot of emphasis on our locality, this is our home homeland, it’s the place where we're most well-known across the North-West region and we're looking to build on that”, McAvoy continued.

While the new bars are not being funded through crowdfunding, the businessman stated the benefits of the process has helped Seven Bro7hers with these separate goals.

He added: “It’s given us the springboard to move forward to create a new destination location; that's the wider ambition over the next three years.”

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