Following Wine Country Weekend in Santa Rosa, California, Live Oak Bank, Breakaway Funding, LLC and KC Branch Firm collaborated to share with local wine producers, craft brewery owners and small-batch, craft distilleries (so far, there’s only one up here), how they could “Harvest the Social Capital in the Community” into financial capital.

And if ever there was an industry that celebrated “community,” it is wine and spirits. Friends and family gather to share food and drink, tell stories (some truer than others) and create fond memories. The unanimity of clinking glasses to toast the good times or misfortunes gone by, have solidified a friendship out of what began as an acquaintance. Any reason is a good reason to share our lives over a glass of our favorite libation.

“And for wineries, distilleries and breweries, this social phenomenon represents a huge financial opportunity,” said Kim Kaselionis, founder and managing partner of Breakaway Funding, LLC:

The members of your wine, beer or bar club who already have an emotional and/or economic relationship with you, your brand or our mission, are more likely to take advantage of becoming an investor of your company.

To illustrate this fact, Crowdfunding Insights recently published the First Quarter Title III (aka Regulation CF) report in which the Wine & Spirits sector was the top capital beneficiary of all of the crowdfunding activity since these rules were released in May 2016, beating tech by nearly a half million dollars.

Event co-host, Jeff Clark, the Wine and Craft Beverage Domain Expert at Live Oak Bank noted:

What banks are looking for as a lender is the same thing someone is going to be looking for as an investor.

But be warned: Compliance with regulations governing the Alcohol Industry can be a complex issue. Persons investing equity funds through crowdfunding websites are not permitted to have conflicting inter-tier interests. The simplest example of a conflicting equity interest would be a person with an ownership interest in a wine, liquor or beer producer investing in a crowdfunded campaign for a restaurant or a person with an ownership interest in a restaurant investing in a small craft producer crowdfund.

While five different crowdfunding models were discussed, two in particular pertain to the alcohol industry:

• “Equity crowdfunding,” where companies set out to raise equity funding in small amounts from a large number of investors; and the second,
• “Rewards-based crowdfunding” where items, experiences, or products and services are offered in return for funds contributed through the crowdfunding website.

KC Branch, expert post-Prohibition attorney discussed how these two models differ in many ways but have similarity with respect to how and what companies need to be aware of, and what regulatory filings are required to maintain compliance with these laws to steer clear of prison bars and to keep your license intact.

Thank you to our fabulous wine sponsor, Purple Wine + Spirits, dedicated to creating extraordinary wine and distilled spirit experiences that surprise and delight. Their portfolio includes brands such as Avalon, Raeburn, Four Vines, Lucky Star, Cryptic, Flint & Steel and Calista.