Are you looking for startups to invest in?
That’s great if you are. Just remember that like investments in the stock market, they’re not a sure thing, especially during this unique period of coronavirus-related volatility.
Dr. Zachary Cohle, Assistant Teaching Professor of Economics at Quinnipiac University, spoke to InvestorPlace about equity crowdfunding. Specifically, Dr. Cohle spoke to how the coronavirus could impact equity crowdfunding.
“Due to the shutdowns related to Covid-19, the ability for firms to raise capital will be significantly weakened,” says Dr. Cohle. “For those who were once looking to invest, the Covid-19 virus may prevent investment in two ways. First, the uncertainty of one’s own income in the coming months will make people less likely to tie up money in long-term investments. Second, the uncertainty of businesses during the next few months will make the expected payoff from any investment decrease.”
That said, if you understand the risks involved, you might want to consider the equity crowdfunding platform StartEngine.
StartEngine was founded in June 2015 after the Securities and Exchange Commission enacted Title II of the JOBS Act. However, it was the enactment of Title III, which allowed companies to make securities offerings to non-accredited investors, that really got things rolling.
In almost four years since, StartEngine has become one of the country’s leading equity crowdfunding platforms, raising more than $125 million from more than 200,000 investors.
Currently, it has 88 investment opportunities on its platform. Here are what I believe are some of the best startups to invest in on StartEngine.
StartEngine Startups to Invest In: BrewDog
Amount Raised: $707,220
Amount Raised Per Investor: N/A
Price Per Share: $60
Minimum Investment: $60
Long before the U.K. craft brewer invaded the U.S. market in 2017, the duo of founders, James Watt and Martin Dickie, were busy raising funds for their business through equity crowdfunding. In 2010, the duo completed its first of many Equity for Punks equity raises, selling 639,400 pounds worth of BrewDog shares. Since then, the craft brewer has convinced more than 120,000 investors to invest in its dreams of global domination.
BrewDog USA launched its first beer in America in June 2017. Its 42-acre site in Ohio has a 100,000 square-foot brewery, a taproom and restaurant, the DogHouse craft beer hotel, and the Overworks sour facility.
The current brewery has an annual capacity for 426,000 barrels of beer with the ability to build a second brewhouse to accommodate more growth.
BrewDog USA’s first equity crowdfunding raise was in 2016. Its Equity for Punks USA raised more than $7 million or an average of approximately $875 per investor. Its second in 2018 raised more than $2.2 million or $355 per investor.
Currently, it is looking to raise up to $39 million, which will be used to fund a West Coast expansion, build BrewDog outposts in smaller towns across America, and opening the American arm of BrewDog Distilling, producing gin, vodka, and whiskey.
If BrewDog USA raises all $39 million, the UK parent, BrewDog plc, would own 88.2% of its stock with equity crowd funders owning the rest. BrewDog USA’s most recent revenues, according to its Form 1A Regulation Offering Statement, are $12.4 million with EBITDA of $503,030. It has total assets of $47.5 million and zero long-term debt.
2019 was a successful year for BrewDog USA as it increased its production by 46% to 53,000 barrels.
“Apart from Punk IPA [the company’s flagship beer], which is flat, everything else is growing like crazy, so it’s continuing to drive distribution on those day-in, day-out beers, along with offering up our Limiteds and our Amplifieds and the nitros and the AFs [alcohol-free], so there’s fun and excitement on the side,” said Adam Lambert, the company’s chief revenue officer.
Through the first half of 2019, BrewDog USA’s Ohio business (56% of its sales) grew by 90%. The Mid-Atlantic (25% of sales) grew by a whopping 182%. Overall, it sells 60% of its beer through the off-premise retail channel and the remainder through bars, restaurants, and corporate taprooms and bars. Off-premise sales grew by 127% through the first six months of 2019, while on-premise grew by 97%.
The company currently operates a taproom at its Columbus brewery, two other taprooms in the Columbus area, and two additional locations in Cincinnati and Indianapolis. It plans to open a sixth location in Pittsburgh later in 2020.
As part of its expansion plans, it intends to put rentable apartments above each of its taprooms. Called “Kennels,” it’s another way the company is looking to engage its customer base.
“Everything is about creating this incredible beer-themed experience where you can come stay above one of our bars and have a gorgeous space with incredible room amenities,” said special projects manager Keith Bennet. “They’ve got some of the best beer from around the world in them.”
The biggest downside? The coronavirus could topple it.
The founders sent an email to shareholders in March that suggested the coronavirus is going to severely hurt its business on both sides of the pond.
“As Covid-19 reaps unforeseen havoc on our world, our number one priority must be the safety of our loved ones. As for BrewDog, I am writing to tell you that things over the next few months are going to be very, very difficult for us,” co-founder James Watt stated.
“Covid-19 has already had a colossal impact on our business and we have lost almost 70% of our revenue overnight. We have two main priorities at the moment. Number one: survive. Number two: preserve as many of the 2,000 jobs we have created at BrewDog as possible.”
Although this is a stark reminder of what a difficult time it is for businesses of all sizes, I believe that BrewDog USA will come out of this stronger than ever due to its unique brand and fundraising activities.
And one more thing: Unlike publicly traded stocks, equity crowdfunding investments come with perks. As perks go, what could be better than beer?
Other Startups That Interest Me
Amount Raised: $692,015
Amount Raised Per Person: $373
Price Per Share: $5.95
Minimum Investment: $101.15
Why do I like it? Millennials will love the company’s CV1 campervan. Plus, it already has $3.7 million in sales.
Amount Raised: $183,660
Amount Raised Per Person: $759
Price Per Share: $30
Minimum Investment: $30
Why do I like it? I live in Halifax, Nova Scotia, which is right on the Atlantic Ocean. It’s a very windy place. Flower Turbines’ product is a much better renewable energy solution than solar. It is the future of renewable energy. The biggest concern? It currently has only a few customers and no sales history. It is what you would consider an actual startup.
These are but a few of the investments worth exploring on StartEngine, but they’re all very good options to get you started on your journey in the equity crowdfunding space.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.