BREWING INVESTORS GUILD LLC
A Money Marketplace for the Craft Brewing Industry
BREWING INVESTORS GUILD BLOG
Take This Survey!
If you are considering investing in a craft brewing business, we suggest that you consider the following ten questions before making an investment. These questions are focused on the craft beer industry. They are an extension of the Investing in Main Street Scorecard. You can download a free copy at
For each question, you may assign a score of 1 to 5 points (from low to high). This scoring system enables you to consider how strongly you feel about your answer and provides a framework for comparing two different investment opportunities. Remember that this is your scorecard. Your opinions are your own and the most important. The questions are appropriate for all craft brewers, but your answers are unique to you. The investment must fit your preferences, knowledge of investing and your personal goals – today and many tomorrows. Will you be happy with your investment decision after writing a check and five years from now?
Take as much time as you need in answering the questions. If you don’t know the answer to questions regarding business operations, ask them of the craft brewery owners. Feel free to seek the opinion of your friends, investment advisor, accountant or attorney, but be careful of peer pressure. Each of these questions will be examined in detail in other posts to the Brewing Investors Guild blog at
Please consider joining this association of craft beer consumers. Briefings and workshops on investing in a craft brewing business will be offered through Local Money Marketplace at
If you think there is another, more important question that should be on our top 10 list, please let us know. We are supported by Durban Indoor Hops and you can leave us your recommendation at
Raising capital in a stable, strong economy is difficult, but raising money during chaos is statistically impossible. Chaos may be global, limited to an industry or localized to a specific business. Chaos may originate from an economic downturn, entry of a disruptive technology into the market or a change in international tariffs laws. In any event, the relationship between a business and a capital source will materially change for the worse.
Consideration of developing a chaos capital strategy is not just an exercise. All of the conditions described above are currently present or threatening. See a recent video by Salem Ismail with Singularity University: https://www.youtube.com/watch?v=FNQSM4ipZog. I am not talking about sentient artificial intelligence taking over the earth and waging a war against mankind. I am simply looking at the consequence of disruptive innovation. In addition to general economic volatility, your business may also suffer from local disasters like floods, droughts, wild fires and other bad events. Studies show that in times of disaster, many businesses fail.
During times of economic instability, existing capital sources typically adopt higher requires to receive capital or may withdraw entirely from providing capital under any condition. Changed lending requirements may be mandated by government agencies enforcing federal and state laws as occurred during the Great Recession. In a worst case scenario, a capital source will make a call for pay down or pay off of established funding.
The time between submission of an application for capital and receipt of capital usually becomes stretched and unpredictable. The cost of raising capital grows higher. The price of money climbs. Competition for money will be amplified.
A business may find that all of these changes may cause different capital sources to change position as to which may be best.
A common capital strategy for a time of chaos is to set aside a cash reserve. This is sometimes called ‘having dry powder’. However, this strategy assumes that a business has surplus cash that can be held in reserve. If a business is engaged in startup or growth, it is far more common for a business to be working with little or diminishing cash between capital campaigns. All too often, a business is working with no cash safety net and is vulnerable to ordinary challenges in raising capital.
A capital strategy for chaotic times requires a 360 degree, full spectrum approach that seeks capital of all types from all possible sources. Each capital source is layered as a series of fall backs. When the preferred source of capital fails to deliver, the second source of capital is automatically triggered.
Development and implementation of a capital strategy cannot wait until chaos reigns. Advanced preparation is required so that transitions from one capital source to another are smooth and immediate without significant delays through a serial progression. This may require gaining approvals and placing capital sources in standby mode until needed. Iron clad contracts must be negotiated when times are good, because acceptable terms may not be available during chaos at any price.
Preparations should include maximizing the receptivity of the business to receive capital. Often a business will defer actions that would improve their image. Actions may include expanding its board of directors, establishing a board of advisors and gaining popular support within its community as the business strives for perfection.
Creative approaches to raising money should be explored. Businesses may team with other businesses to share costs and spread the risks. A business may line up guarantors, switch to assets that are more acceptable as collateral or even invest in a local bank. Even though sales agreements may be practically unenforceable, businesses may seek long term purchase commitments from their customers.
Businesses should build their chaos capital strategy as soon as possible. It should be reviewed quarterly to see if chaos is impacting capital sources, its supply chain and/or its customers. Once chaos appears, the special capital strategy should be implemented and adjusted as necessary.
Dakin Capital Guild LLC
**For a more robust explanation of how to form an investment club, please reach out to ‘Invest Local Colorado.’ In the coming months we will be releasing a how-to guide on how to form your own investment club -- stay tuned!
My name is Andrew and I am a twenty-six year old law student who, in two years times, will leave law school with around two-hundred thousand dollars in debt and a small nest egg I have been building since I was a kid. My ability to mitigate this debt, and my general lack of spending power, make it nearly impossible to climb out of such a hole until I am in my thirties! A friend of mine just finished paying off his law school loans at the age of forty.
So, I decided I wanted my money to get to work for me. However, the first investment opportunity that interested me is a private placement that has a minimum investment of $1,200. For a lot of us, whether its school loans, or supporting a family, or putting food on the table, twelve-hundred dollars is out of the question.
But, lucky for us, there’s another way we can put our money to work when we don’t have too much to spare; we can form an investment club. An investment club is a group of people legally bound together for the purpose of investing in securities. Depending on the state you are in and the rules of the club, five-dollars may be all that is needed to join an investment club. Investment clubs allow people with little money to pool that money so that they have enough to meet the minimum investment level set by the business, or state, seeking funding. I may not have twelve-hundred dollars to spare, but I can certainly forego a few burritos and coffees and wrestle up fifty or a hundred dollars. If I can get some friends to match my money by becoming a member of an investment club, we can make the investment as a group.
There are considerations people must take into account before either entering into, or forming, an investment club -- this includes considering applicable laws, what type of taxes will apply, how the club should be managed, how frequently meetings are held, etc. But this lengthy list is not a reason to not get involved in investing. You just need to do a little homework. The information is out there, the experts are out there, and soon enough you will have access to our ‘how-to form an investment club’ blueprint.
Investment clubs were all there was before the recent passage of new laws that authorized investment-based crowdfunding. Investment clubs, like investment-based crowdfunding, empowers the ordinary person (technically called a ‘non-accredited’ investor) and encourages the cooperation and codependence between club members. While returns on investment in real dollars may not be high, the benefit of learning how to invest and how to team up with like-minded people from the community are immense.
Do not let the number in your bank account make you think that you have no chance to become a part owner of a local business. Sure, by yourself, it may beyond reach, but joining an investment club will give you a lot more options. Empowerment goes beyond the dollar -- to the bonds we hold in common with our fellow citizens, and to the know-how of managing your limited pocket-money.
A popular term in the entrepreneur world is ‘pivot’. It has become a cliché term for justifying almost any business decision. Financial Times defines ‘pivot’ (when referring to a shift in strategy) as a “tortured path that most start-ups go through to find the right customer, value proposition, and positioning.” (http://lexicon.ft.com/Term?term=pivot)
A shift in strategy implies that an organization is moving from one stable position to another stable position. Volatility occurs during the shift. Depending upon the degree of change, an organization may find themselves with a minor change that is hard to tell from the original position or it may be a major change that demonstrates ‘Blue Ocean’ thinking.
What if the pivot is not moving from one stable position to another? Everything is in a state of change all the time. In reality, the starting point for a pivot is commonly undefined, poorly understood and in motion. Is the pivot like walking across the room or like falling off a cliff?
What if a business person makes a second pivot before completing the first pivot? Some pivots make be instantaneous, but most take time to implement. No matter how well planned, change may force a new pivot before the first one is done.
What if stability is never achieved? What if instead of a pivot being a deviation from an established strategy, the strategy becomes to implement a series of pivots?
With a change in presidential administration, with new majorly disruptive technologies entering the market every month (artificial intelligence, blockchain, autonomous cars, etc.), with a change in power being handed off from the Boomers to the Millennials, with the threat of ‘climate change’, and with the overpricing of stocks on Wall Street, when would it be appropriate to expect a stable marketplace where a product or service may mature and generate profits great enough to justify the investment?
I believe we have entered an era of continuous change. This era requires continuous pivots – a ‘pinwheel’. A business must adopt a flexible strategy that can adapt rapidly to whichever way the wind blows: whether it be a gentle breeze or a hurricane.
Most management teams that find themselves reacting to continuous change will always feel out of step. Better management teams will be able to forecast changes and position themselves to take advantage of opportunities as they occur. The best management teams will be able to influence the changes to gain an advantage.
The greater challenge will be for an organization to maintain focus on its mission and goals. Milestones, schedules, budgets and resources may change, but making and selling quality products and services to satisfy customers must stay on track.
There are a number of books on the topic of continuous change. Most of the authors start from the position that the organization is in control of its own destiny and working proactively to implement change as a culture. However, a more realistic approach is to assume that most changes will result from external forces and the organization must try to align with the change or continuous change will become chaos.
As a twenty-six-year-old millennial, a significant part of my upbringing was in a world of economic fragility, the oligopoly that is our financial institutions, and the inability of most citizens or businesses to participate in or change these institutions. Throughout all this, I felt powerless -- social movements lacked a cohesive direction, and my ability to affect banks or other financially omnipotent organizations was all but none. I don’t have billions, or millions, or even thousands-upon-thousands of dollars -- I am one person with a small wallet. Yet every day, people with bigger wallets are able to define and shape my financial life and stifle the financial empowerment I may seek.
Now there’s a little bit of light shining through the cracks of our exclusive financial institutions; investment-based crowdfunding. The Federal government has legalized investment-based crowdfunding and Colorado has seized this opportunity by passing the Colorado Crowdfunding Act (CCA). Now, I have a real, albeit small, opportunity to inject my voice, my beliefs, into the economy. Under the CCA, I can now invest up to five-thousand dollars in any business willing to use crowdfunded dollars. Before the CCA, such investments were limited to ‘accredited’ investors -- individuals with over one-million dollars in assets.
I can now invest in my favorite brew-pub, but who cares? Why does that matter? Well, for one, it means I can now support the businesses, and by extension, the people and the community I care about and am a part of. Now, I can turn to my friends and say -- “let’s support this place we all love so much” -- I can now shape my reality and support the things and people I care about in a way I was unable to before. Even better, I can actually make money when I offer my support.
Beyond these local concerns, there are larger implications when we exercise our new-found power as small investors. Thanks to the CCA and the federal legalization of investment-based crowdfunding, democracy has wriggled a finger into financial opportunities and institutions limited to the 1%. Now, instead of pitching a tent in a park and hoping for the best, I can put my money into businesses I believe in and support and affect the market, and indirectly these institutions, with my wallet. I can resist and make myself richer all at the same time. I can shape the world as I want it to be by putting my wallet behind that belief.
If democracy is equal treatment and equal opportunity before the law as demanded by the people, than investment-based crowdfunding is a step in the direction of a democratic economy. It is upon all of us to seize this opportunity and continue to demand such equality.
When investing in a craft brewer, the single biggest factor regarding whether the business makes money or loses money is the management team. Success is dependent upon the experience, ability and contacts of the individuals who lead the business.
Too often, a person who enjoys brewing beer at home decides to expand their hobby into a business without having any business skills or knowledge. Although they have made some tasty beers that receive accolades from their friends, knowing how to make beer is not enough. Craft brewing businesses fail. Despite their popularity, craft brewers do not get a free pass when it comes to achieving cash flow and profits.
To begin with, making beer in small quantities is not the same thing as making beer in large quantities. Anyone who has ever fixed their own dinner and then tried to fix a Thanksgiving dinner for 20 people understands that when making something in volume things get faster and many tasks must be performed at the same time. While tapping a barrel may be a one person task, while you are tapping the barrel someone must be pouring beer at the bar. Someone else may be engaged in marketing and sales and yet someone else may be doing the books and filing regulatory reports. With all these people, someone may be needed to coordinate (manage) how everyone works together as a team.
You can begin to see how operating even the smallest brewpub is getting complicated. If the craft brewer has not yet asked you to invest, they may be operating on the limited money in their own pocket and stretching the limits of their time and budget. Although all investors prefer that the businesses in which they invest expend their investment money efficiently, operating with too little money places a stress on the business and everyone working for it.
Before you get out your checkbook and make an investment, you need to give serious thought to whether this business is a business and the leaders are business people and not just brew masters. The craft brewer does need a brew master, but that is a topic for another post.
What qualifies a group of people to be the management team of a craft brewing business? The most important characteristic is experience. Although the investment advertisements on television state that ‘past results or no assurance of future results’, a person who has a proven track record of successful craft brewing businesses is more likely to succeed. Their experience places them in a better position to know, anticipate and overcome problems as they arise.
The second most important characteristic is integrity. You have to believe that the person who you entrust with your money will put your interests ahead of theirs. Not just on sunny days when everything is going well, but also on rainy days when everything is going wrong. Some people would not consider spending your money freely on themselves or wasting it on frivolous activities. They see holding your money as a privilege and a responsibility. They will do the best they can to honor your trust and make the craft brewing business successful.
You need both – capability and integrity. Unfortunately, one or the other is not enough. The integrity requirement speaks for itself. The capability requirement is not as obvious. However, I speak from deep and repeated painful experiences that good intentions will not always get the job done. I have had good friends and associates look me in the eye and tell me not to worry when I should have. They did their best within their ability, but it was not enough.
When someone you know asks you to invest in a craft brewing business, you must consider the offering objectively. Do they have what it takes to succeed? If they do not, you should have a frank conversation with them about filling the gaps in their management team. Someone new to the craft brewing business can hire a seasoned hand, fill their board of directors and advisors with experts and engage service providers to meet your needs for a business master.
Karl Dakin, Executive Director
Brewing Investors Guild
Everyday everyone is making investments. It may be an investment in your future. It maybe the purchase of a commodity. It may be an investment in a business opportunity.
At its most basic level, an investment is an action where you give something with the expectation, but not the certainty, of getting back something of greater value in the future.
An investment has three primary components:
An understanding of these three components is necessary to making an investment decision: to invest or not to invest in a craft brewing business?
It is not an investment when you give up something of value and get something of equivalent value. This is a purchase. You may get a good deal on your purchase and you may be able to resell what you purchased for more money, but still that is not an investment. This is inventory.
It is not an investment when you give up something of value and get something of greater value immediately. This is a gambling bet.
It is not an investment when it’s “a sure thing”! Since very few things in life are guaranteed, this component is the hardest thing to wrap your mind around. Every investment has a ‘risk’ that things will not work out as planned. In some cases, the risk is managed by spreading the risk over several opportunities (this is called insurance) or the risk is covered by something else of value (this is called collateral).
As you can see, whether something is an investment or not is open to interpretation and debate. However, this post and the other posts in this series are focused on craft brewing businesses. This will help simplify our analysis.
What you give up of value when making an investment may be your money, your time, your reputation or anything else that you have of value.
A common example of investing in a craft brewing business would be for you to give up cash for an equity ownership position. At some time in the future, you may receive back cash in a greater amount than you invested. In making the investment decision, you must ask:
A craft brewing business seeking your investment should be able to clearly and concisely answer these questions.
You will have more questions to be answered. These questions and preferred answers will be the subject of future posts.
In making a decision to invest in a craft brewing business, you should ask yourself does the craft brewing business share your values? Does it conduct itself in a way that makes you proud? Does it contribute to the world and make it a better place? The alternative is that the business does nothing. Worse yet, the craft brewing business may be an extractive business that only focuses on making money to the detriment of its team, its suppliers, its community and its customers.
An investment in most craft brewing businesses will not make you rich, so what else can they offer you? One thing a craft brewing business can do is take action to care about selected people, your community or any other cause in which you believe. You can make a condition of your investment a requirement that the craft brewing business will adopt a policy, implement a course of conduct or take action. If the business does not agree to your terms, there are other places for you to invest your money.
Whether the craft brewing business has 3, 30 or 300 employees, it can be a force for good. By its actions, it can set the bar higher in making life better for its team. In the same way that you can choose who you invest in, a craft brewing business can decide where it spends its money. Think of the craft brewing business as a force multiplier. You are one person. All of the people who work for or with the craft brewing business are an army. By working together, you have the ability to more efficiently achieve common goals.
So what can a craft brewing business do? It can (this is a very short sample list):
When talking with the owners of a prospective investment opportunity, ask the hard questions. Do not assume that your investment will make you proud. Don’t accept written policies as an accomplishment. Ask about how the policies will be enforced. Ask about how the conduct of the company will be reported to you after you make an investment. The achievement of your values is one form of payback of your investment. Look for information and systems that will give you as good of a picture on how the business acts as it may provide on how much profit it has earned.
Quite often, a small business lacks the time and money to do everything you want. In these situations, you have an opportunity to make an investment of your time in addition to an investment of your money. You can:
Simply making an investment and looking for a distribution is missing a great opportunity. Get your investment to work harder for you for things you care about.
When making an investment, you are making a purchase. You are acquiring a piece of a business. You are exerting your power to make a difference. Your decision to invest or not to invest is a form of voting with your dollars. If a business enables or turns a blind eye to an activity, such as gender-based violence, then you can choose not to invest and withhold your money.
I had an opportunity to attend a presentation by Joy Anderson with the Criterion Institute (http://www.criterioninstitute.org) on Finance as a Tool to Address Gender-Base Violence. I am a fan of Joy’s and appreciate her work that advocates the use of investing as a tool for improving the world.
As an investor in craft brewing businesses, your investment has the ability to make a difference. This ability has greatest impact at the time you make your investment decision. There are other times when you can influence a business in which you have already made an investment, but those are a topic for another day.
I had a number of take aways from Joy’s presentation:
Gender-based violence goes beyond physical abuse and includes anything that causes a person to have fear or to feel like a piece of property. Any harm or threat of harm that can get in your head will act to reduce the quality of employment. The continuing disclosures by #MeToo victims are high level demonstrations of violence, but gender-based violence can include wait staff getting pinched on the ass while serving drinks.
Gender-based violence will cause a person to perform below their capabilities. If a person is worried or unhappy or mad about their supervisor demanding sex or grabbing a feel or showing more respect for their barrel brewing system, their mind won’t be on their work and certainly won’t be on giving their best effort. If a business has a reputation for permitting gender-based violence, the business will not attract and employ the best people who can choose to work somewhere else where they feel safe.
Gender-based violence may occur anywhere between where a person leaves their home and their work station. A craft brewing business that saves money by operating out of a warehouse in an industrial district should assure that parking in the lot or walking from the bus station does not expose an employee to an attack. If the business requires an employee to work off hours, does a safe environment extend from door to door?
Gender-based violence cannot be managed if there is no data. The rubric of “You can’t manage what you don’t measure’ also applies to gender-based violence. If there is no internal reporting process that does not force an employee to go through the supervisor that is the problem, then the employee has no recourse to due process like a courtroom without a judge. Where the supervisor may be the boss or largest shareholder, the reporting process should include you as the investor.
When evaluating an opportunity to invest in a craft brewing industry, ask some questions that will allow you to determine if the issue of gender-based violence is being managed. Ask questions about business polices, about practices and about communications. Simply asking the questions will have an impact. However, the greater impact will be accomplished by making your requirements for managing gender-based violence a condition of your investment. No management. No money!
Your impact can extend beyond the craft brewing business to any supplier or reseller. A craft brewing business can make a choice in suppliers of grains, hops, yeasts, barrels, canning equipment and service providers as well in their business customers of distributors and retailers based upon their policies, practices and communications regarding gender-based violence. This is another question you can ask in your ‘due diligence’ review.
It’s hard for a craft brewing business to raise money. If you disagree with how the business conducts itself, you can make it harder.
If you invest make an investment in Molson Coors or Anheuser-Busch InBev, will you make a difference?
If you buy a share of Molson Coors today at today’s price of $60.26/share, you will own one of 195,585,037 Class B shares (0.00000051%). If you buy a share of Anheuser-Busch InBev at $94.42/share, you will hold one of 1,693,242,156 ordinary shares (0.000000059%). Will your investment make a difference?
By contrast, if you choose to invest the same amount of money in a local craft brewer, the same dollar investment will get you a far greater percentage of ownership. $100 in a $1 million valued craft brewer will get you 0.01% and the same investment amount in a $10 million valued craft brewer will get you 0.001%.
More importantly, what can the craft brewer do with your money? A small startup brewery can be started for as little as $250,000 and a 30 barrel brewery may cost $1.2 million with lots of factors impacting cost of start within this range. Therefore, your $100 combined with 2,499 other people could start a small brewery. If you use an equity/debt ratio of 20/80, you would need only 500 investors at $100 each and borrow the rest of the money to establish a new brewery on your block.
Smaller amounts of money may enable an existing brewer to expand by adding another barrel system, bottling or canning equipment or open another location. The craft brewer may finance expansion by borrowing money from the bank, but getting the same money from you, a customer, may be lower priced. As a customer, you buy beer and contribute to sales. If the bank uses the craft brewer as a vendor for each of its events, you may not be the biggest customer, but, again, maybe you can influence that.
However, we are still very narrow in our thinking by just talking of money. As a fractional owner in a craft brewer, there are lots of things you can do to help the craft brewer succeed:
Whereas your money is important, your contribution of time, knowledge and reputation may make the difference between the success or failure of the craft brewer.
By becoming a fan of the craft brewer and sharing their story, you will engage in ‘word-of-mouth’ marketing – the highest form of advertising. The average person has somewhere between 150 and 300 people within their personal and business networks. If your endorsement would cause each of these people to buy one beer a week (the definition of a ‘craft beer consumer’) at a price of $6 per draft, you can drive between $48,000 and $96,000 per year in sales to the craft brewer.
That’s just a start. Let’s add to this illustration the possibility that within your circle are one or more restaurants that sell beer on tap from local craft brewers. If you arrange for the restaurant to buy kegs from the craft brewer, your ability to influence sales may be amplified by the thousands of people who are customers of that restaurant.
There are so many things you can do as a fractional owner that will be helpful to the business owner. You can make a difference!
Address:7148 S. Andes Circle, Centennial, CO 80016