THE KNOWLEDGE
Surfing the crowd
WORDS: TOM BRUCE-GARDYNE
Turning to ‘armchair investors’ to help get a distillery up and running is becoming increasingly popular – but as Tom Bruce-Gardyne reports, it’s also an approach that requires careful navigation
“There’s one thing outside of barley, yeast and water that every distillery needs – and that’s cash, lots and lots of cash,” says John Mckenzie, who founded GlenWyvis in 2015. Six years on, the world’s first community-owned, crowdfunded distillery has just released its first single malt in time for Christmas.
Finally, all that investment may reap some return. Having been involved in a local, crowdfunded wind turbine which benefited from tax relief, investment returns and voting rights, John felt the same financial model would work for his dream to make whisky on his farm near Dingwall. It was an idea that had been forming since he started flying drinks industry bosses around distilleries as a commercial helicopter pilot in 2003.
An initial crowdfunding campaign lasting 77 days smashed its £1.5 million target, and came in at £2.5 million. Cue big celebrations and ‘trebles all round’ as they say in Private Eye, but within a year of construction it was clear more cash was needed to feed the money-munching monster that is whisky production. A second crowdfunding campaign ensued, raising an extra £1.1 million which was topped up by a £300,000 grant from Highlands & Islands Enterprise to give a rough total of £4 million.
“That buys you a whisky distillery with a gin still as well, staff to make the stuff, a warehouse, some stock, and just about gets you to year three,” says John. Having hit that milestone early this year, some 5,000 bottles of GlenWyvis are being despatched to the army of armchair investors. Each has invested £250 or more, and been given a vote, a T-shirt and offered rewards such as a share of a cask or helicopter ride. As a community benefit society, the aim is to invest in other local projects once the distillery breaks even.
GlenWyvis during construction
5,000 bottles of GlenWyvis are being despatched to the army of armchair investors. Each has invested £250 or more, and been given a vote, a T-shirt and offered rewards such as a share of a cask or helicopter ride
Peter Brown and the Isle of Barra
CROWDFUND WITH CARE
GlenWyvis inspired Peter Brown to crowdfund his proposed Isle of Barra distillery which, being community-owned, would be safe from a takeover by predatory investors unlike other funding models. Tapping high-net-worth individuals for investment might be a more efficient way of raising money, but there is always the risk they will cash in later if a suitably juicy offer is made.
Peter’s first attempt in 2019 to raise £2.5 million failed. “There were lots of things we could have done an awful lot better,” he says candidly, and having since attended a crowdfunding presentation in Falkirk with a checklist of ‘do’s and don’ts’, admits: “We were actually a text-book example of how not to do it.” But he claims to have learnt a lot from the experience and says he may well have another attempt once a current share offer for founder shareholders is complete.
He describes crowdfunding as “part of a funding package and not a silver bullet”, and questions whether the various platforms have the necessary structures in place. “With buying a new school minibus, that’s a doddle. There are no unknown unknowns, only known unknowns” he says, sounding like Donald Rumsfeld. “I don’t think any of the platforms have the back-office capacity to take on really large, complex projects, unless they can find that expertise elsewhere. I think a ‘With Care’ label should go on all crowdfunding of that scale.”
“Our philosophy until 12 months ago, was ‘let’s invest the funds we have in making the best whisky we possibly can, and we’ll worry about sales and marketing further down the road”
Max Vaughan, White Peaks distillery
INVESTORS AS ADVOCATES
You can attempt to crowdfund at any stage of the journey from conception onwards. The White Peaks distillery in Derbyshire funded its building in 2016 and initial production with the help of 16 private investors, and only launched a crowdfunding campaign earlier this year. “Our philosophy until 12 months ago, was ‘let’s invest the funds we have in making the best whisky we possibly can, and we’ll worry about sales and marketing further down the road’,” says founder Max Vaughan.
That point in the road is fast-approaching, with the launch of White Peaks single malt in the new year. “I think part of the success of crowdfunding is in how deeply invested your community of followers is in your business,” says Max, who was acutely aware of getting the timing right for the campaign. He was told to expect roughly a third of the investors would be from his existing followers on social media, with a third attracted by the marketing buzz before and during the campaign, and a third from existing crowdfunders on the platform itself.
In the end he raised £1.3 million, less fees, which was double the target. “We’re absolutely delighted,” says Max. “It’s given us a real financial platform so we can hopefully realise a lot of our ambitions when we launch our whisky, and it enables us to put our shoulder behind it.” Yet, long-term, it may be the enthusiasm of the investors that counts for more than the actual money raised. “In our case we’ve got over 950 new shareholders who you hope will become advocates for the business going forward,” he says.
The White Peaks team
The Thompson brothers at Dornoch distillery
At Dornoch Castle in Sutherland, the Thompson brothers have twice used crowdfunding to help launch their micro-distillery in 2016 and expand it two years later without resorting to bank loans or equity investors. In 2018 backers were offered the chance to buy a range of casks from an ex-bourbon octave for £2,000 to a 100-litre, sherry-seasoned ex-bourbon cask for £4,500. Phil Thompson agrees with Max Vaughan that crowdfunders can become valuable disciples, and says:
“You do find they kind of preach your product, your ambitions and goals to their friends. If you get it right, you gain their trust and they really buy into your philosophy.”
The mothership of all crowdfunding in the drinks sector is obviously BrewDog which launched its ‘equity for punks’ programme back in 2009. As of June, it boasted an army of 180,000 ‘punks’ who had collectively invested £80 million in the business. Crowdfunded distilleries are small beer by comparison. While few would welcome the sort of publicity the Scottish brewer has been attracting of late, BrewDog certainly helped put this investment model on the map. For anyone dreaming of making whisky, crowdfunding can be a valuable tool, but getting it right is an art form.