Tuesday, October 27, 2015

Can crowdfunding work for restaurants? - The Globe and Mail

Special to The Globe
Published Friday, Oct. 23, 2015 9:22AM EDT

Crowd-funding for restaurants is a fickle beast. Sure, Zack Danger Brown infamously raised $50,000 to make potato salad on Kickstarter last year (it started as a joke; he ended up giving the money to charity) but the story typically has a less happy ending.

Crowd-funding is, in the simplest terms, the act of raising money via small sums from a large group of people in exchange for rewards of varying values. It’s considered a form of alternative financing instead of the traditional methods such as bank loans.

Most of the successful crowd-funding campaigns are product-based – where people support a campaign and receive an item such as a t-shirt or watch, or get a credit on a film. Even then, Kickstarter says only 37 per cent get fully funded, while those that don’t meet their goal don’t receive any funds.

Restaurants face an obvious uphill battle when it comes to crowd-sourcing: there’s no cool product to ship, and the pool of supporters are limited to the local city.  It’s also difficult because equity crowd-funding – money given in return for a share of the business – isn’t allowed unless the investor is accredited.

Past OurEx Live Posts