Crowdfunding $$$ source for Australian small businesses

Tom Baker, 26, used Pozible to source funds for his coffee liqueur business image www.money-au.com

Caffeine boost: Tom Baker, 26, used Pozible to source funds for his coffee liqueur business based in Central Coast NSW. Photo: Smudge Publishing

When Jules Donovan and Sam Colligan needed capital to kick-start their business they turned to an unconventional but increasingly popular source of finance – crowdfunding. Crowdfunding involves raising lots of small pledges of money – generally via the internet – to help fund a project or venture.

From their kitchen in Wallan, Victoria, Donovan (a personal development therapist) and Colligan (a chef) began selling vegan butter and ice cream at farmers’ markets in January 2014. The response was good. “From that we thought, ‘This could be a thing’,” Donovan says. However, to transform what had started as a passion into a viable business, the pair needed more money. Turning to crowdfunding, they raised $25,000 in 2014 through Pozible, Australia’s biggest crowdfunding platform. “With that we built a walk-in cool room and walk-in freezer in our garage,” Donovan says. “We converted the front half of our house into a commercial kitchen.”

Under the name Half Pint Vegan Dairy they now supply their products to 150 stores across Victoria and are one of a handful of Australian vegan ice cream suppliers. Donovan credits their success to the vegan community. “They’ve been right behind us.”

Twenty-six-year-old Tom Baker, co-founder of The Mr Black Spirits Co, is another Pozible success story. Despite the business starting out as a few guys in a shed, Baker says Mr Black was a single-minded vision to make “the best coffee liqueur in the world”. Since raising over $26,500 on Pozible in 2013, the small Central Coast NSW based craft distillery sells hand-ground cold-extracted coffee liqueur – what Baker describes as “alcoholic espresso” – to 550 venues in Australia, Hong Kong and Britain.
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“I say to everyone, crowdfunding is so much about the crowd more than it is about the funding,” he says. “These people that supported us are very much our No.1 fans.

“Crowdfunding is a great way to test your idea and gather early support for your product or brand before you actually make it,” he advises. “If we just put it on the bottle shop shelf from day zero we wouldn’t have sold any.”

Rick Chen, co-founder of Pozible, has seen a rise in the number of small businesses founded by crowdfunding. “It’s been growing very fast and it’s a very exciting field to watch,” he says. He reports an increase in farming projects and home-brewed alcohol funded through Pozible. “In the urban areas we’ve funded heaps of cafes, little bars and quirky little businesses. Crowdfunding is not restricted only to creative projects although that’s quite well known because it started from that.”

According to Chen, there are about four Australian-based crowdfunding platforms including Pozible. Since beginning in 2010, Pozible has raised over $42 million in pledges and launched more than 10,500 projects.

Globally, crowdfunding is helping more new businesses than venture capital, according to a 2015 report by Massolution (a research and advisory firm specialising in the crowdsourcing sector). Global crowdfunding is expected to reach $34 billion for 2015 with business and entrepreneurship accounting for 41 per cent of funding. By contrast, venture capital accounts for $30 billion of investment a year.

Crowdfunding offers few barriers to entry. However, it’s no guarantee of success. Pozible claims a success rate (determined as meeting the funding goal) of 57 per cent.

Chen suggests: “Know your target audience and how you’re going to reach out to them. An existing audience base is always important – from Twitter followers to Facebook friends.” He also recommends attending one of Pozible’s free workshops.

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Henry Sapiecha

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