Investing in a start-up brewery?

Who is your attorney with expertise in the laws governing breweries and beer?
Who is your accountant?
May I read your business plan?

If the answer is negative in any case, smile, say thanks, walk away.

 

To that I would add never, never invest money you can't afford to lose.

 

stay away. his chances of failing are overwhelmingly high. also, friends and investments are two things that should never mix

 

In my mind, this is the main one. Not that the others aren't important, but if they don't have a very deep understanding of what it takes to succeed in this very competitive marketplace, you might as well burn the money that you're investing or just give it to them without expecting any return on your investment.

 

Make sure he's brewing New England IPAs!

 

I recently walked away from a similar "opportunity." The risks are great, especially with people who have never ran a brewery or a business. The people that approached me had experience as contract brewers and were looking to open for themselves. Their business plan was extremely flawed even to my inexperienced eyes and they had no idea of how to deal with a municipality. In my opinion, any attorney they hired would obliterate a nice chunk of their capital just in order to get the doors open in any location on Long Island. I'm willing to take a risk but unwilling to throw out money.

 

Be willing to treat any money you invest as Monopoly money and assume you'll never see it again. It's just the price of admission into the fraternity of brewery ownership. As your primary return on investment, rely on psychic returns (basically, bragging rights and feeling cool and important because you own a piece of a brewery plus the altruistic joy of helping a friend and contributing to community development). If you get a positive financial return, that would just be icing on the cake (not that you should be a sucker and jump into any bad plan or bad deal just for the fun of it).

From purely a personal finance standpoint, I definitely recommend against it if you don't already have a healthy nest egg and emergency fund and aren't already comfortably maxing out on contributions to tax-advantaged investment plans like a 401(k) and IRA.

One note of caution: I'm not sure about Wisconsin, but some (many?) states restrict equity stakes in breweries to a single company per part-owner, even if you're a minority investor. So investing in this brewery may preclude you from investing in another. Make sure you run that possibility by your lawyer or financial advisor.

 

I remember when Sam Adams went public, I think the buy in was about $ 520.00 or so, maybe 10-15 shares. Thought the better of it when my wife said if you bought 5 cases a year, how long would that $ last?

 

Honesty I think you said it best, the odds of this turning into an early retirement are slim. I would not take a chance on ruining a long time friendship over it. If this was me I would support my friend in his adventure but I would stay out of it financially. Hope it works for him, cheers.

 

Wow, harsh words, but I guess I'd say the same unless I knew the specifics. As I've said many times before, a brewery is a business and it needs to be operated as a business. Yes, beer quality and the styles that you produce are a big part of it, but quality beer doesn't necessarily sell itself, and it's really only one part of the equation - there's a big machine behind it! I have to laugh as there have been so many shitty breweries that have made it because they were good on the business end, yet so many great breweries that didn't make it because they were only focused on the beer. I think you'll be able to gauge what the story is but another thing to keep in mind is how many "owners" are involved - too many cooks in the kitchen almost always leads to failure.

 

I'm in the process of opening a brewery in Illinois right now. Its been a long process already, and we're still a good 6 to 8 months from opening. We've learned a ton as we've gone, and I'm sure there's still a lot of surprises for us in store. Some things I'd ask your friend are:

-Whats your business plan? I'd want to know his brand, and what his goals for growth are, and why he thinks those goals are attainable.
-What experience does he have working in a professional setting, and what else has he done to prepare himself for brewing professionally?
-What does he or other investors know about the aspects of running a business beyond brewing great beer? I can speak to this firsthand, because I'd be lost without my guys who know the business side of things far better than I do, and that lets me focus on beer. Make sure either he is very business savvy, or someone on his team is.
-Whats the craft beer scene in his location? Does it seem likely to support his company's growth?

 

Never been in this position, but it would be interesting. The advice on a business plan and a market study are solid. If you can afford to do it and those documents look good, do it. I know a guy that had a chance to get in on the ground floor with a major PC upstart in the mid 80's, but passed on the chance. It became a top manufacturer, and my acquaintance could have made a huge fortune. The chances are slight, but could be a lot of fun if you can stay involved, perhaps be in on brewing decisions. Or at least sampling!

 

Easy to make a small fortune in brewing. Just invest a large fortune.

Def. need a business plan, and money people, and good lawyer(s). Those will not help if you do not have a brewer with a proven track record already making beer better than other brewers, and do not have beer styles that fit existing niche(s) in the area.

 

If you have alot of disposable income that won't hurt you, throw a few bucks to your friend to help him get started.

If you have no money but some time, volunteer to sling beers in the taproom a few hrs on the weekend, or help out in some other ways with volunteer time.

Don't do it for chasing riches, do something to help a friend.

 

No first hand experience in investing in breweries/restaurants, but I do have some close experience in investing in a friend's business. It has really strained the relationship, even with things going fairly well. Be sure to get your payment plan in writing, otherwise your 'investment' is just gifting cash under the good nature'd assumption you'll be paid back in some form.

If I recall correctly, breweries and restaurants typical annual return is a very low amount on the initial investment. So aside from the long shot of him making it big, there would be a small chance you'd even make back what you put in over a decade or two. Obviously it would depend on how much you invest and the payment plan.

All that said, investing in a brewery is not something I would do (a local brewery here actually just opened up stock options - not for me!) due to the low rate of return, but if you have the extra capital and that's how you want to spend it - go for it. I think others here have outlined some good questions and talking points for moving forward.

 

How did your get together go? Did you come away with a good feeling about it, or not so much?

 

Best investment is to just buy lots of the beer

 

like with a lot of the things, the answer is "it depends". As long as you're not looking for quick returns, this could be alright.

If he just wants to remain a "local" brewery (say, maybe a 2-6 county area, or 40-50 mile radius, and maybe 1-2000bbl/ year), that's one thing. He might not need much beyond the original investment to get to the size he needs, and stabilizes at.

Now, if he wants to be a "regional" brewery, and do lots of packaging, and be in a lot of bars to the point where he's gotta start dealing with distributors instead of self-distributing (say maybe 6-15k bbl/year) your ROI is gonna be a bit farther down the line.

Is it gonna be strictly a brewery with a tap room, strictly a production brewery, or go into the brew pub side of things?

Lots of moving parts here.