The Rise of Crowdfunding
Research from Barclays shows that the number of business owners aged 25-34 in the pub and bar sector has increased by a quarter in the last three years – and now accounts for 15 per cent of the industry. In addition, 42 per cent of pub and bar businesses in the UK opened in the last three years. It’s a booming industry with a large number of new entrants.
Of course, any new business needs to convince its investors that it can deliver returns. In the hospitality sector, new concepts will inevitably lease their premises and this requirement for unsecured funding can make it difficult to secure investments through traditional routes such as bank lending. This is one of the reasons crowdfunding is proving so popular in the leisure industry. It suits the sector – and we have already seen a number of success stories, particularly for new concepts and young brands.
You only have to search through any of the online hospitality industry news portals to see the rise in prominence of crowdfunding. Almost daily there is a new concept launching, promoting or closing its crowdfunding venture – more often than not with a positive story to tell.
Most recently, the likes of London-based Sourced Market (£750,000 target extended to £1.5million), Australian coffee chain Beany Green (£800,000) and Mexican brand Chilango (£2.5million) all reached their investment targets via crowdfunding. In our own region, healthy food chain Filmore & Union raised £932,000 from 317 investors in 2015.
We must not forget that crowdfunding is still a relatively new platform. Investors are more likely to be backing a concept than an established business and there is still some debate over the valuations put forward by some fledgling businesses. However, there are more than enough success stories to prove the merit of crowdfunding in the hospitality sector.
For entrepreneurs, it can provide an invaluable funding source to give their concept the kick start it needs, even when other sources are not viable. For investors, when pursuing the right opportunity, it enables them to get involved with ventures right at their initial concept, which can help maximise returns. It’s a win-win situation when done well.