A leading Tunbridge Wells law firm which has been at the forefront of the financial revolution in crowdfunding scored another success last month after helping Chapel Down raise £1 million for its subsidiary Curious Drinks.
It is the latest initiative from the Tenterden-based brewer and vineyard operator to be backed by Cripps.
In total, the form has worked with Chapel Down to raise almost £5 million since last year when it became the first quoted company in the UK to use this form of alternative finance to reach investors.
The move put both Chapel Down and Cripps at the heart of the crowdfunding phenomenon, which until then had been on the fringes of mainstream finance.
Salim Somjee, a Cripps partner who helped oversee the projects, believes crowdfunding is now becoming an essential part of commerce.
He said: “It’s really interesting how much everything has changed in just 12 months. Traditionally SMEs went to banks but what this did was create the democratisation of investment.
“Chapel Down was a smaller company giving small investors an opportunity.”
Last year more than 1,400 investors took bought shares in the company through crowdfunding platform Seedrs, investing an average £2,680 each and raising £3.95 million, the highest amount ever raised using the method.
But apart from the extra investment, which was used to lease an additional 400 acres for vineyards, there were other added benefits.
Mr Somjee explained: “It had novelty and created a great story which led to further interest in the brand itself. It was another form of advertising for them.”
The latest £1million to be raised is itself breaking the mould, according to Mr Somjee, as the money is buying equity in a subsidiary of a listed business and not in the parent company itself.
Curious Drinks, the subsidiary, intends to use the money to build a state-of-the-art brewery and visitor centre in Ashford.
Chapel Down’s success using this method has sparked interest in the business community at large Mr Somjee said, adding: “Equity crowdfunding is regulated and so it has taken a while to take off. But while it is quite new in the UK, it is starting to gain traction.”
But like any form of investment, those taking part need to understand there is always an inherent risk.
Mr Somjee said: “People have to be aware that just because it is new does not mean there are not the same risks as in other types of investment. And as it is new it is going to take some time to see what works, what doesn’t and get a feel for it.
“It has been exciting to work with Chapel Down. It is not often you get to work on such a pioneering project in your career.”
A FINANCIAL HISTORY OF CHAPEL DOWN
The first vines were planted in 1977 in what was originally called Tenterden Vineyard. 2001 Frazer Thompson, a former strategy director of Whitbread and global brand director of Dutch brewer Heineken, was brought in to run the vineyard and the company was renamed Chapel Down. 2004 A decision was made to brand English wine as an upmarket product which required funding. The company raised £2million from entrepreneurs Nigel Wray and Richard Balfour-Lynn and listed on the ISDX, a small-cap stock exchange. 2013 The company raised a further £4.3million through another placing on ISDX to build a brewery and fund new vineyard land in Kent, Essex and Sussex. 2014 Chapel Down raised £3.95million through crowdfunding platform Seedrs and an institutional placing, pricing each share at 28p. 2015 The company is seeking to raise a further £1million through crowdfunding by issuing shares in its subsidiary Curious Drinks on Seedrs to build a new brewery in Ashford.
CASE STUDY
In March, the Times reported on Tunbridge Wells entrepreneur Denis Renty, who had launched his Belgian gluten-free craft beer brand Van Bulck In June 2014 through investment sought on the crowdfunding platform Angels Den.
Mr Renty raised his target of £30,000 in 48 hours, with two investors each taking a seven per cent stake in the firm.
The funds enabled him to negotiate a six-month deal with distributor Love Drinks in February to supply his products to Waitrose, Oddbins, Majestic Wine and designer store Harvey Nichols.
He was also able to secure contracts to export his beer to Hong Kong and the Philippines.
Mr Renty said at the time: “I approached the team at Angels Den and managed to secure not only the target I wanted but in fact doubled it and split the money between two different investors in less than 48 hours.”
“By choosing crowdfunding you get some great marketing opportunities as well as funding and it attracts people who are really interested in what you do.”
WHAT IS CROWDFUNDING?
Crowdfunding allows companies to sell shares directly to small investors without the need to list on a stock market.
This makes it easier for people who would not normally deal in shares the opportunity to invest in a company.
There are three main forms of crowdfunding:
- Debt crowdfunding, known as peer to peer lending. Money is sourced from various individuals in the form of loans which are then repaid with interest.
- Equity crowdfunding gives non-institutional investors shares or a stake in the business in return for their financial investment.
- Reward crowdfunding: an investor’s contribution is acknowledged with a reward, such a free entry to an event or free product(s).
Since the beginning of 2014, more than £1,700 has been raised every hour through crowdfunding, which is now one of the fastest-growing areas of business financing.
According to the UK Crowdfunding Association, more than 600,000 projects and businesses have already been funded.
In addition, about 44 per cent of small and medium-sized enterprises (SMEs) have heard of crowdfunding but so far only nine per cent have used it.
It is not without risks, figures reveal that as of October 2015, just one-third of companies seeking funding on Kickstarter, a major crowd funding platform, were successful.
