BrewDog raises record £5m in crowdfunding round

The Scottish independent brewer BrewDog has smashed equity crowdfunding records by raising £5m from the public in the first three weeks of its fundraising round.

The craft brewers celebrated the milestone with a typically unorthodox PR stunt, dropping taxidermy "fat cats" with parachutes over the City of London to mark "a new dawn for beer and a new dawn for small business finance".

However, All Street - the first analyst firm dedicated to analysing crowdfunding investments - put a damper on the celebrations by saying it was "difficult to see how investors will make a financial return on this deal".

Emanuela Vartolomei, chief executive of All Street, underlined the "high" valuation of £305m and lack of financial forecast disclosures. "There is very little clarity as to how the company will hit the revenue targets required to generate a risk adjusted return for investors," she said.

She said, however, that the company had performed "exceptionally well" in the past. "2014 was the company's sixth consecutive year of growth, with annual turnover climbing 64 per cent to £29.6m. It is a strong company with sustainability at its heart and a talented workforce," she said.

Seven-year-old BrewDog is seeking to raise £25m over a year in what is its fourth round of crowdfunding. It uses its own platform, Equity for Punks, rather than a regulated third-party platform such as Crowdcube or Seedrs, and raised £4.3m in a previous round in 2013.

"Many questioned our target of raising £25m, but we've passed the record we set in 2013 in a fraction of the time," said BrewDog co-founder James Watt.

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Equity crowdfunding has grown fast, securing £84m of investments last year, according to Nesta, an innovation charity. The sector offers individuals the chance to take stakes in unlisted companies, with minimum investments starting as low as £10, although BrewDog asks investors to put in at least £95.

Like many other companies seeking crowdfunding investment, Aberdeenshire-based BrewDog offers extra rewards such as discounted beer for investors.

However, its fundraising has raised eyebrows in the crowdfunding industry, both because of its valuation and because it has opted to sell shares through its own platform.

Julia Groves, chair of the UK Crowdfunding Association, has written to the Financial Conduct Authority to raise concerns over the fact that BrewDog is not using a regulated platform and thus does not have to screen investors for "appropriateness" and present them with the same risk warnings that other crowdfunding websites do.

BrewDog opted to issue a prospectus under European securities rules and its fundraising is not being regulated as crowdfunding because it has not used a third-party platform. Its shares cannot be traded on an exchange, but there is an annual opportunity to buy and sell them using Asset Match, an online service.

The brewer plans to use the money for a series of projects including a new brewery, developing its canned beer range and opening more bars.

Crowdfunding investors often combine different motives, including being part of the "journey of cutting-edge brands", noted Ms Vartolomei.

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