Pro Tips: Financing A Coffee Business Through Crowdfunding

Many of you are probably familiar with crowdfunding.  You’ve likely seen some of the projects online that have gone viral, or maybe you’ve even backed a project yourself. If you haven’t yet heard about crowdfunding, that’s likely to change very soon.

Crowdfunding as an alternative to traditional forms of financing is exploding in growth. The crowdfunding platform Kickstarter.com alone has raised over 1 billion dollars and funded more than 66,000 successful projects to date.

Through two successful Kickstarter campaigns I’ve been a part of, we’ve raised nearly $900,000 in total funding. This has helped us bring Galileo and Cold Bruer to the market.

Tangible products tend to get a lot of media attention, but all sorts of other types of project have been successfully funded. People have used these platforms to produce films, open a coffee shop, and even make potato salad. If you are in the process of writing a coffee shop business plan, there’s no reason you shouldn’t consider crowdfunding as an option to take your coffee shop venture from business plan to business reality.

In this blog post, I hope to share some of what I’ve learned traveling down the crowdfunding path. I can’t possibly cover all the information I’d like to share with you in a single blog post, but I hope it’s enough inspire you to look into crowdfunding as a potential funding source for your coffee business.

What is the prime motivation for your venture?

When looking at crowdfunding as a potential fundraising platform, ask yourself how others may benefit from what you’re doing. Hopefully, a number of community benefits come to mind quickly.

Perhaps the funds would allow you to bring a coffee shop into a neighborhood that is currently devoid of them…

Or, it would allow you to grow your tiny coffee business into the community hub you’ve envisioned…

There has to be obvious benefit to the community that you’re seeking funding from. Otherwise, you’re better off going with traditional funding like a bank loan.

Research what crowdfunding platform is right for you.

There’s a TON of crowdfunding platforms out there. I’d recommend sticking with one of the well known ones like Kickstarter or Indigogo because you will get some extra traction from being associated with them.

When looking into funding platforms, be sure to look at the fine print before you begin crafting your project page. For example:

Kickstarter…

  • Will not allow the resale of items already in existence (you couldn’t offer a coffee grinder that’s already on the market as a reward).
  • Has an all-or-nothing funding model, so no money is given if you don’t reach your goal.
  • Takes a 5% cut.

Indigogo…

  • Much more flexible in what can be funded.
  • Flexible funding option allows you to keep funds if goal is not reached, but takes a 9% cut.

Crafting Your Pitch

The video pitch is the most important part of any crowdfunding campaign. This is where you convince the potential supporter that they should part with their hard earned money in support of your project.

I’ve seen a lot of Kickstarter videos, and there’s no single right way to make a good one. For our first Kickstarter project, we paid a professional video service to make it. On our second project, we made the video ourselves. Either way, the below guidelines will be helpful in making an effective video.

  • Keep is short and sweet. Definitely under 3 minutes. 2 minutes is even better.
  • Make sure your passion for the project shows. This can be tough if you’re a little camera shy like me.
  • Make sure the audio is clear and the camera is steady. You really don’t need professional quality as long as it doesn’t detract from getting your message across.
  • Don’t forget to ask for money!

Get the word out

Now that you’ve launched your coffee business funding campaign, it’s up to you to spread the word. Hopefully, you’ve already got a long list of blogs that have given coverage to similar projects or products. When you e-mail these blogs to tell them about your campaign, avoid generic e-mails. Take the time and personalize them as much as possible. Let them know that you read their blog post on that coffee gadget they covered, and you think they may be interested in what you’re working on.

Blogs love crowdfunded gadgets, but it may be difficult to get coverage for your coffee business expansion or something similar.  In this case, I would turn to your local community to get the word out. Let your customers know about your campaign. Hopefully, you’ve got an established social media network that you can share it with as well.

You’re funded!

With a successful campaign, it’s important to keep your supporters informed about developments. One of the really cool things being a supporter for a crowd-funded project is that you’ve got a sense of ownership in the project. You often have the chance to live vicariously through the project creators during the development process. By posting regular updates with lots of photos, you give your coffee business supporters a window into your world.

There will most certainly be unforeseen delays, but staying in regular contact with them will do wonders to appease them.

Stay Focused

As I mentioned previously, there’s a sense of ownership in the project that the supporters will have. They’ll freely make suggestions about features, uses etc. (this probably happens more with product based projects). Hear them all out, but don’t forget what it is that you’re there to accomplish in the first place. Be weary of deviations from the original project.

Project creators will often add “stretch goals”. Essentially added features to their project should they reach a higher funding level. Be careful about adding these extra features, as they will take up precious development time.

Consider a hybrid financing plan.

Let’s say you want to start roasting coffee in house at your coffee shop. You’ve secured abank loan to expand the building, and add the necessary infrastructure to start roasting coffee onsite. You could then go to crowdfunding to purchase the coffee roasting equipment. An advantage to this is that your supporters would be funding a tangible yet essential component of your overall coffee business. I could imagine a variety of “reward levels” that you could offer in exchange for a donation. Maybe, a special blend of roasted coffee for your supporters (this is something that a potential supporter on the other side of the country could be interested in). For those local, you could offer a coffee class featuring your new roaster for a higher support level… Get creative with what you offer.

Crowdfunding is an exciting new financing option that is open to anyone with an idea, and it’s only going to become a more prevalent financing option. It may not be the right option for everyone, but it’s definitely worth looking into if you are in the process of writing your coffee shop business plan.

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