Equity Crowdfunding Case Study: Ironclad Distillery

Ironclad Bourbon equity crowdfunding video

I’ve signed up to get regular updates from Indiegogo, a leading crowdfunding platform, about their equity crowdfunding offerings. They operate a joint venture of sorts with Microventures which has been pursuing equity crowdfunding for a while. Together they launched what you might think of as “Main Street Equity Crowdfunding” in late 2016.

I was impressed with the professionalism of the offering for Ironclad Distillery. I am not making any judgment about the suitability of the investment, but I’d like to make a few observations that might be useful for anyone considering this type of financing.

First, the company itself is a great model for the type of company that I believe is well suited for equity crowdfunding.

  • It has a consumer product that is easy to understand – bourbon.
  • The founders are a family – dad, daughter, son – which increases the emotional appeal.
  • The company has been shipping product for a year, and has already won an industry award for their bourbon.
  • They have a “made local” story, which should appeal to those in Virginia where they are located, and those who grew up in Virginia but have moved away.
  • It’s not necessarily going to be a huge national business but could end up being a great long term local or regional firm.

What’s The Equity Crowdfunding Deal?

The offering itself helps to illustrate what types of deals may be getting completed in the early days of Main Street Equity Crowdfunding.

  • The offering range is extremely large, between $50,000 and $450,000. This is much wider than a typical private placement offering, but a low minimum allows the company to celebrate their success to date in attracting (as of July 25 2017) about $150,000 from 264 investors.
  • Minimum investment is just $104 at $6.50 per share. Their average investment so far is about $568 per investor.
  • There are perks for investors based on investment size, similar to what you would see in a more traditional rewards based crowdfunding campaign.
  • The pre-money valuation is just $1.3 million. This is roughly half the national average for angel investment pre-money valuations. We will be monitoring to see if this valuation is an outlier or typical of Main Street Equity Crowdfunding. Lower valuations are not necessarily a bad thing. In fact, if the theory of the JOBS Act passed by Congress was to allow more companies to raise equity, lower valuations would be expected.
  • The documents used are Series Seed, an increasingly common alternative to convertible notes. This includes a 1X liquidation preference, a conversion to common stock but the addition of rights offered in future Preferred Share offerings if such an offering occurs.
  • Primary use of proceeds are building out a tasting room, and adding more distilling equipment.

If your company is sort of like Ironclad Distillery, and your financing needs are similar, perhaps equity crowdfunding will be for you. What do you think?

Don Gooding

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