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T V ER N ONIA COFFE E R OA STE R S im Davis knew he'd been pushing the small roaster at At press time, there were 275 campaigns related to coffee on Vernonia Coffee Roasting past its capabilities to meet his Indiegogo and 591 on Kickstarter. In Washington, D.C., La Mano customers' demands for single-origin coffees and signature Coffee Bar raised $15,250 to open a neighborhood coffee shop; blends. But buying a new roaster wasn't in the budget. Coffee Hound in Bloomington, Ill., raised $802 to send one of When the roaster broke in 2012, Davis thought it might be the its baristas to the Big Central Barista Competition; and backers end of his Oregon-based business. "We had less than two weeks pledged more than $278,000 to help Bonaverde Coffee Changers of product in stock," he recalls. "After that, I had no idea what we build a roast-grind-brew coffee machine. "A lot of times, the were going to do." projects are too small for banks to handle, and the other funding After taking out loans to purchase a commercial grinder and options like using a credit card, taking out a second mortgage packaging equipment, Davis knew he had little chance of qualify- or [borrowing against future revenues] come with a lot of risk," ing for another business loan. Charging a new roaster to his credit says Alex Sheshunoff, president of Foodstart, a crowdfunding card was out of the question. He platform that helps food and considered renting time with beverage businesses raise capianother roaster, but the option tal. "The small-business owner didn't pan out. gets stuck." Determined to save his business, Davis took a modern RULES OF THE GAME approach to funding: He turned to the Internet. While crowdfunding is a lowCrowdfunding platforms risk way to raise capital, there like Kickstarter, Indiegogo are a few rules. and Foodstart allow creators On sites like Foodstart and to post their projects online Kickstarter, projects must meet and seek funding from backspecific criteria. Foodstart only ers to help bring them to life. allows food and beverage projThe funds pledged through the ects, while Kickstarter limits its online platforms are not donacampaigns to creative projects tions or loans, and the funds with defined final products like aren't offered in exchange for a a new line of coffee products or More than $2.7 billion in financing was raised through share of the businesses. Instead, a neighborhood café. Indiegogo, crowdfunding in 2012, according to the research firm backers support projects that on the other hand, welcomes tug at their hearts—no strings anyone with a need to raise Massolution. That number is expected to increase 81 perattached. capital to launch a campaign cent in 2013, with backers pledging $5.1 billion in support In June 2012, Vernonia and allows backers to decide through crowdfunding platforms worldwide. Coffee Roasters launched a camwhether to support a project. paign on Indiegogo with a goal Creators pay a percentage of raising $5,000 to purchase of the campaign total to the the new roaster. Davis was shocked when backers pledged $5,810 crowdfunding platform; the fees vary based on the platform. For in three weeks. "I didn't think we had a shot at meeting our goal," example, Foodstart and Kickstarter charge creators 5 percent, he recalls. "I was overwhelmed by the support we received; it was while Indiegogo charges between 4 and 9 percent. Across all platso humbling to see how many people wanted to see us succeed." forms, creators are also responsible for fees associated with PayPal and credit card payments, which range from 3 to 5 percent. There are also specific criteria for accessing funds. All funds CASHING IN ON CROWDFUNDING pledged through Indiegogo are paid out when the campaign ends, Crowdfunding has long been the provenance of writers, film- which means that creators receive a check whether their campaign makers and other creative enterprises, but a growing number of hits 100 percent (or more) of its stated funding goal or falls far small-business owners and aspiring entrepreneurs are turning to short of the target. crowdfunding to support their dreams. Kickstarter has an "all or nothing" policy that requires creators More than $2.7 billion in financing was raised through crowd- to meet or exceed their stated funding goal to receive financial funding in 2012, according to the research firm Massolution. support from backers. In other words, if a campaign hits 99 perThat number is expected to increase 81 percent in 2013, with cent of its stated goal, all of the funds are returned to backers and backers pledging $5.1 billion in support through crowdfunding the creator receives nothing. platforms worldwide. Foodstart takes a combination approach; existing businesses continued on page 46 freshcup.com | January 2014 45