Starting any business comes with its share of risks and needs for capital, but traditional lenders have grown more risk averse to restaurant entrepreneurs than other industries. This reality has forced some aspirational people to source nontraditional methods of fundraising thanks to the Internet.
Enterprising entrepreneurs are finding success through crowdsourcing, which is the process of enlisting the public to donate to your “cause” with smaller amounts of money through a website. Potential businesses will set a goal and money is only collected once the goal has been reached within a specified time range. If the goal is not met, the donations go back to the donors. Platforms like Kickstarter and Indiegogo are among the most popular crowdsourcing sites.
Kitchen, a restaurant and cooking school in Columbus, OH, successfully started a Kickstarter campaign to raise the final costs needed for permits and construction. Owners Anne Boninsegna and Jen Lindsey knew even if they could get bank funding, it wouldn’t be enough. Boninsegna said they had “seen many restaurants fail because of debt or undercapitalization, ‘so [they] knew if [they] could get money from as many sources as possible, [they]’d have a better chance to be successful.’”
Why would someone donate to a business? Donors receive incentives from restaurants based on how much they pledge. Commonwealth Bistro offers tee shirts, digital recipes, magnets, aprons, and cutting boards as a perk for donations of $5 or more. “Contributions of $250 and above will grant patrons 50% back on their gift through in-house credit” in addition to their original amount.
The value of a community of passionate advocates cannot be overstated. Cultivating this community not only gets restaurants started but also establishes a base of people emotionally invested in their success before the doors even open. It is a group that restaurateurs can turn to for ideas such as naming a new cocktail on the menu or determining which special should become a menu staple. Receiving input from the community offers valuable insight from the people that matter the most versus keeping all decisions internal.
Whether you need to raise money to start a food truck, update the bar area or open a new location, crowdsourcing may be an option. Your advocates recognize the potential benefits and could put you over the top.
