MobCraft

Working at House of Brews, brewmaster Andrew Gierczak works on a batch of MobCraft Beer's coffee cream nut brown ale. The Madison company has announced plans to build a $2 million brewery in Milwaukee.

The crowd didn’t fund Madison’s MobCraft Beer with all that it hoped for.

But CEO Henry Schwartz says he’s happy with the outcome, anyway.

MobCraft was the first company to try Wisconsin’s new crowdfunding law that took effect in 2014. The brewery — which decides which beers to brew based on customer response — had hoped to draw $250,000 in investments as a first step toward building its own brewery, a project estimated to cost $2 million.

Instead, MobCraft pulled in $75,000 worth of funding commitments by the time its 31/2-month campaign ended Jan. 15.

“We didn’t quite reach our goal, but we’re still pretty excited,” Schwartz said.

Fifty-three investors put their money into MobCraft, in amounts ranging from the minimum $525, as specified in MobCraft’s offering, to the $10,000 maximum allowed by the state. The average investor pledged $1,000, Schwartz said, and fewer than half of the participants were people MobCraft’s three owners knew.

Lessons learned

The whole process has been a learning experience, and if he’d better understood the rules from the start, fundraising would have come out further ahead, Schwartz said.

MobCraft thought the law required people to submit their Social Security and bank account numbers before they could even look at the brewery’s proposal. “At least 10 people told me that was the reason they didn’t go for it,” Schwartz said. With just two weeks left to the campaign, the group learned that while the information is needed, it does not have to be provided until after the person decides to invest.

Lawyers told MobCraft it couldn’t publicize the crowdfunding on social media because out-of-state residents would see it. Late in the game, Schwartz found out social media could be a tool, if direct messages were sent to Wisconsin residents.

Unlike some crowdfunding sites that require a campaign to reach its full goal or it gets nothing, under Wisconsin’s crowdfunding rules, investors can choose to stay in or pull out if the full amount is not pledged.

So MobCraft contacted each of the 53 potential investors. Only five backed out, lowering the total raised to $68,525.

The young beer company is still working on a package to finance its brewery building project, hoping to land some loans. “Crowdfunding is a huge portion of the money that we need,” Schwartz said.

With its three founders as the sole full-time employees and two part-timers recently hired, MobCraft reached $200,000 in revenues in 2014 and turned a small profit, Schwartz said.

For nearly two years, since May 2013, MobCraft has brewed its crowdsourced beers at House of Brews, 4539 Helgesen Drive, creating about 220 barrels a year on a 10-barrel system.

Looking for growth

A new brewery with 30 barrels could give the company capacity to double its output at first, Schwartz said.

“We’re looking to be around the 5,000 (barrel) mark in the next three years,” he said.

Two locations are still being considered, Schwartz said, and he is hoping to break ground this spring.

A second brewery, Common Man Brewing, of Ellsworth, has since filed with the Wisconsin Department of Financial Institutions to hold a crowdfunding campaign.

MobCraft used the Milwaukee-based CraftFund platform to raise money. Four more companies have since applied with the state to serve as crowdfunding platforms, which means they host the fundraising proposal and provide information to potential investors.

They are:

• Auction Center USA, Beloit

• Badger Crowdfunding, Shorewood Hills

• Equity for Business, Madison

• Wise Green Planet, Stoughton

For MobCraft, the crowdfunding campaign provided more than money. Some investors have valuable connections to banks and to the beverage industry, and some were just helpful “to bounce ideas off of,” Schwartz said.

“We got a lot of great feedback from our investors,” he said.

Being the first to go through the crowdfunding process has offered up “brand-spanking-new knowledge,” Schwartz said, and that’s “right up our alley. It’s like brewing beer with new ingredients.”

He said if all goes well, MobCraft would like to open its own brewery by the end of 2015.

Is that realistic, Schwartz was asked?

“If the financing goes through, it definitely is,” he said.

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Judy Newman is a business reporter for the Wisconsin State Journal.

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