In this edition of the The Startup Dialogues, I talked with Don from Grimm Bros. Brewhouse, a new brewery opening in Loveland, Colorado. Grimm Bros. is in the process of finding investors to seed their dreams of opening a brewery. This is a very relevant and important step for startups that can sometimes catch starry-eyed entrepreneurs off guard. Thanks again to Don and make sure you check out their website here. If you are interested in becoming an investor, you can contact Grimm Bros. Brewhouse at don@grimmbrosbrewhouse.com

What is your brewery concept, and why should someone invest with you?

Our mission statement is as follows:  “The mission of GBB (Grimm Brothers Brewhouse) is to provide fresh, exciting, and flavorful beer to consumers. It will focus on German-style Lagers and Ales but not limit itself to any one style. GBB is a result of a passion for beer and beer education and will endeavor to spread this passion at every opportunity.”

As we took a look at our local market we saw a hole that we felt we could fill by brewing German style beer.  The craft beer market has shown a consistent growth over the last 5 years reaching as high as 12%.  Even in our rough economic times the craft beer industry continues to grow at an incredible rate. When looking at market growth per person, the mountain west region is historically the second fastest growing in the United States.  Investing in our brewery not only gives investors a chance to place their money behind a credible market, but it also allows them to invest in a local business, a place they can congregate and be a part of.

What steps did you take before you began seeking investors in order to build credibility? (business/marketing plan, etc.)

When we became serious about opening a brewery, we spent a good 12 months researching the market, learning about the industry, talking to breweries and brewers, and writing our business and marketing plans. We had been home brewing for quite a few years by this time and felt we at least had a handle on brewing, but through this process we really started to understand the business side of operating a brewery.  By the time we had finished our business and marking plans we were able to approach our potential investors not only with confidence in our plan but with enough knowledge to answer any questions they asked.  We think this is our biggest source of credibility.

The beer helps too!

Who are your main target sources of investors?

Our main target sources at this time are private individuals who want to be part of a brewery in some way.  Most of our investors are people who enjoy beer and are passionate about it.

Are you working with Venture Capital firms or Angel Investors?

We looked into this, but decided that we would rather not proceed down this road. We currently own the brewery 50/50. If we would have gone with an angel investor or venture firm, the majority of the company would have gone to that investor.  While this would have made it possible to start at a much larger level, we feel that we can afford to start a bit smaller and work our way up without giving away a majority of the ownership.

Do you have an ideal ratio of investment capital to other capital (loans, out of pocket)?

Ideally we would like to see 2/3 of our initial capital investment come from private investors.  The rest will be handled via a combination of loan and out of pocket expenses.

What strategies have worked best in finding potential investors?

We have tried several; we have had some investors show up via word if mouth, we have had a couple hits using Craigslist, we even hosted a beer tasting with a local restaurant in order to drum up some potential investors.  By far the best contacts we have are people that we have met and have had a chance to talk with face to face, like friends, family, and co-workers.  Not only has this proven to drum up investment, it has also spawned additional contacts that we can follow up on.

What strategies have worked best when making your sales pitch to potential investors?

We have tried hosting beer tastings for potential investors and powerpoint presentations, however we have found that the best strategy is sitting down with a potential investor over a beer face to face, explaining our idea, sharing our business and marketing plans and answering questions.

Have any strategies backfired? If so, how were you able to turn them into a learning experience?

Yes, at one point we were going to work with the local businesses in our town to have an Oktoberfest celebration.  We had a meeting with everyone involved and agreed we would proceed.  We began brewing a massive amount of beer for a home brew system.  Once we had all of the beer underway, however, we found out that the Oktoberfest celebration was not going to happen and we were stuck.  We were able to turn around and work with a local restaurant to host a beer tasting that allowed us to share this with the public that ended up being a very positive experience.

We did learn that you have to be flexible; the best plans can sometimes fall through especially when it involves multiple parties.

How has your investment product (a brewery) affected your ability to raise capital? Are investors eager to get involved with such a ‘fun’ company concept? Or are they wary?

Most definitely, all of our investors are people who want to be involved in a “fun” project.  People love beer and our investors are people who want to be involved not only in a brewery, but also a local business that will be part of their community in years to come.

We have also seen the other side of this as well though, where people are a bit wary to enter into a new market, some of the people we have spoke with are just not familiar with the brewery market and are therefore timid about jumping in (especially in our current economy).

What is the investment structure you offer? What is the security offered?

We are offering a 7% annual interest on a 5 year unsecured promissory note. Our payments will be applied to interest first and principle second. Our first payment will be on September first of this year and the final payment on September first of 2015. After working with our business consultant and lawyer, we decided that this would be the most effective route given our limited budget.

If you have any other questions or issues you would like to see covered regarding the financing of a brewery, let me know in the comments and I will do my best to find answers for you. Thanks again to Don from Grimm Bros. Brewhouse.