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Sunday, 11 November 2012 20:05

Coffee roaster turns to crowdfunding for next venture

Written by  Nick Manes
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Kurt Stauffer Kurt Stauffer Courtesy photo
GRAND RAPIDS — When Grand Rapids-based Rowster New American Coffee looked to expand into a new venture it brewed up, the company found better than expected results from a nontraditional source of funding.

The small roastery and coffee shop launched its newest venture, Regular Coffee Company, by turning to online crowdfunding platform Kickstarter for funding, surpassing its goal last month.

With the tagline, “Regular is the new awesome,” Rowster is attempting to reach a far larger market while adhering to its familiar strict quality standards. Owner Kurt Stauffer has used that simple idea since he started roasting coffee professionally on his back porch in 2004.

A stop into the minimalist-designed store on Wealthy Street in Grand Rapids instantly reveals that Stauffer and the people who work at Rowster are passionate about coffee. Each drink is made with painstaking consistency, a kind of passion and quality that is not cheap, Stauffer told MiBiz.

“A lot of roasters are cutting corners on quality or have no quality coffee initiative at all,” Stauffer said. “Even then, I don’t see how they make any money roasting for $8 per pound. That is ridiculously cheap for the amount of labor and the distance and steps in the process from origin to your cup.”

Because a number of Rowster’s coffees sell for more than $15 per pound, the roastery has decided that it needs to make more affordable offerings. This is where Regular Coffee comes into play, Stauffer said.

Stauffer’s idea for Regular Coffee Co. is to offer customers the same level of quality coffee at a cheaper price.

“Our Regular Coffee subscribers can be anywhere on Earth and still be part of a very exclusive club, getting crazy quality at a regular price and getting it delivered to their door,” Stauffer said. “Plus, members will have access to exclusive information about the farm and the roasting and special offers just for members.”

To help get Regular Coffee off the ground, Stauffer turned to the popular crowdfunding and fundraising tool, Kickstarter. The online service has been used by local companies such as Teamwork Bags and Bartertown Diner, as well as other local bands and nonprofits.

Regular Coffee beat its fundraising goal of $10,000 on Oct. 12. Donors were given anything from a hand-written note — for the $5 level — up to one-year subscriptions to Regular Coffee and other swag, reserved for donors of higher levels.

“We were fortunate to have stumbled upon an interesting enough concept to get backers. Eighty percent of our backers are people we don’t know, which really validates our assumptions and encourages us to keep on going,” Stauffer said.

However, Stauffer said crowdfunding sites such as Kickstarter don’t take the work out of being an entrepreneur.

“Kickstarter is no free meal ticket,” he said. “People tend to have selective memories and only recall all the great success stories borne on Kickstarter. But I think the number of successful campaigns is less than 10 percent.”

While crowdfunding sites like Kickstarter and Kiva are becoming more and more popular among startups, experts caution that there is a time and place for when they should be used.

In short, they are not for everyone.

“Where I don’t think (crowdfunding) will work is when they are used by especially high-tech companies that have long product development times, such as life sciences. Multiple rounds of funding make it too complicated,” said Sandra Cochrane, a technology business consultant with the Michigan Small Business and Technology Development Center (MISBTDC).

However, Cochrane said the type of initiative started by Rowster is perfect for this new online fundraising tool. Getting a range of supporters also helps validate a concept’s potential viability, she said.

“A bank loan doesn’t validate markets,” Cochrane said.

Until recently, crowdfunding had a narrow usefulness for capital formation, but a recent law could lead to new opportunities, sources told MiBiz.

“I’d separate crowdfunding into two categories: pre-sales/donations versus small equity investments,” said Jason Pliml, a fellow technology business consultant with the MISBTDC. “The second category is currently being defined by the SEC.”

In April 2012, President Obama signed the Jumpstart Our Business Startups (JOBS) Act into law. Within that legislation were several provisions for crowdfunding, including selling equity in startup entities. Pliml expects the SEC to have those details worked out sometime in 2013. He does, however, warn that entrepreneurs should proceed with caution in offering equity via crowdfunding.

“Experienced investors force businesses to really define themselves and they identify risks,” he said. “Crowdfunding investors are unlikely to provide this crucial feedback.”

Despite these words of caution, both Pliml and Cochrane are supportive of crowdfunding, when used in the right ways.

“Rowster has been doing exactly what crowdfunding is designed for,” Cochrane said.

Read 2786 times Last modified on Sunday, 11 November 2012 20:54
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