June 22--It's only logical that MobCraft Beer, a Madison craft brewery that makes its ales based on a majority vote by customers, would be the first company to sign up to use Wisconsin's new crowdfunding law.
It's the company that's concocted such brews as Rabbit's Bounty carrot cake ale; Blood Orange Tea Weizen; and Chocolate Banana Stout.
"The whole premise behind our company being a crowdsourced brewery is that we are very focused on interacting with our customers. How much more can we be connected with our customers than by having them be part-owners in our company?" MobCraft co-founder and president Henry Schwartz said.
The state's crowdfunding rules took effect June 1, and as of last Friday, MobCraft is the only company, so far, to take advantage of the financing tool.
What the funding mechanism does for companies is to let them raise up to $1 million -- or $2 million, if they submit an audit -- through a Wisconsin-based crowdfunding portal.
That's a lot more money than the typical project seeks using informal crowdfunding websites such as Kickstarter or Indiegogo. It's also substantially less than a company might raise in a very structured and formalized initial public stock offering through the U.S. Securities and Exchange Commission.
For an investor, Wisconsin's crowdfunding law is a chance for someone who is not super-rich to own a piece of a company with the possibility of getting back more than just, say, a T-shirt, if it succeeds -- but, officials hope, without the risk of going broke if the business fails.
"We're hopeful that Wisconsin entrepreneurs could find new opportunities to raise money and start new businesses," creating jobs and boosting the economy, said Patricia Struck, administrator of the Department of Financial Institutions' securities division.
"I think it's going to be a game changer," said Zach Brandon, Greater Madison Chamber of Commerce president. "It brings a whole new class of investors" and it also brings funding to businesses that "largely are not going to be technology-based."
But it's not for everyone, either as a company or as an investor.
Building a brewery
According to the company's 13-page disclosure statement, Mobcraft wants to raise $250,000 to $500,000 and will issue up to 142,857 shares of its Series B common stock at $3.50 a share. The minimum purchase is 150 shares at $525. If investors don't commit to at least $250,000, the stock sale won't happen.
The money is to go toward running MobCraft and paying Schwartz and co-founder/brewmaster Andrew Gierczak a salary of $1,000 a month for the next six months and $1,500 a month after that. Giotto Troia is the other co-founder but is not currently an employee.
The company, founded in 2012, brews its beers at the House of Brews, 4539 Helgesen Drive. Through the $308,000 already raised -- mostly from a bank loan -- MobCraft has purchased "the guts of a brewery" and a bottling machine, Schwartz said.
In 2015, the company plans to raise $1 million in an equity financing to build its own brewery.
MobCraft had hoped to begin raising money last week, 10 days after submitting its offering on June 8, but the bank lined up to hold the investments suddenly bowed out, days after the filing, over concerns about potential staff costs for returning the stock purchases, if the fundraising effort failed, Schwartz said. He said he is talking with several other banks.
"It's just a delay," he said. "Everything else is lined up and ready to go."
Schwartz, 25, is not shy about taking on the business world. He started his first business at age 15 -- a retail skateboard and snowboard shop, called Board to Death, in Menomonie, near Eau Claire, in western Wisconsin. The shop won Schwartz an award as Young Entrepreneur of the Year in 2007 from the National Federation of Independent Business/Visa USA. The $10,000 scholarship prize helped Schwartz pay for college at UW-Whitewater where he started a socially conscious bottled water company.
So trying a new business venture is old hat to Schwartz.