Crowdsourced funding boosts Bemidji micro-brewery

Bemidji Brewing Company beers
Two of the different beers the Bemidji Brewing Company have produced, a dry hopped pale ale (lighter of the two) and a robust oak aged porter (darker of the two)
Photo by JohnHeller for MPR

Tina Hanke and Justin "Bud" Kaney are standing in a community kitchen at Harmony Food Cooperative, getting ready for the day in a few weeks when they and a partner, Tom Hill, plan to start brewing beer on a commercial scale.

Hanke cracks open one of their craft beer specialties, a bottle-conditioned "rye Saison," describing it with appreciation as "a little bit more bubbly of a beer, almost like a champagne quality."

The three young entrepreneurs think they know how to make beer that people will like. But finding the money to start a micro brewery is a tall order, perhaps more demanding and complicated than making the beer.

They can use the cooperative's certified kitchen to start small and keep initial costs low, but to build on that advantage they have turned to a national crowd-funding website called Kickstarter.

The New York-based website was founded in 2008. It lets entrepreneurs apply for a specific amount of money for a proposed creative project. If Kickstarter approves, the projects are posted online, where anyone can contribute money to the venture.

"It's pretty humbling to have that level of support."

People who believe in the project make contributions in exchange for small gifts like t-shirts or invitations to special events. If the fundraising goal isn't met, no money changes hands. If it succeeds, Kickstarter gets 5 percent.

Crowd-sourcing efforts like Kickstarter can become one more emerging tool as communities try to encourage homegrown entrepreneurs, adding to such sources as angel fund investor groups and competitions to spur entrepreneurial innovation.

The Bemidji brewers set out to raise $15,000 on the site, but by the time their three-month online campaign ended in January, the trio had surpassed that goal by several thousand dollars.

About 250 people contributed money to the hometown brewing venture, more than half of them strangers to the three, Kaney said.

"It's pretty humbling to have that level of support," he said. "The business we're launching people are excited about."

Founders of the Bemidji Brewing Company
L to R Tom Hill (St. Paul), Tina Hanke (Bemidji), Bud Kaney (Bemidji) the founders of the Bemidji Brewing Company in the Community Kitchen at Harmony Natural Foods Co-op in Bemidji, MN.
Photo by John Heller for MPR

Kickstarter allowed the group to move forward at the nano-brewery level and created a buzz around the fledgling business, Hanke said.

"It made the community aware of us," she said. "It showed that we exist and it will show investors or bankers that we were capable of leveraging that amount of money already to get the community behind something."

The Bemidji Brewing Company plans to have its first public batch of brew on tap in a few local pubs by early summer.

There's no data measuring how effective Kickstarter is in sprouting new businesses and jobs. But since 2008, more than $150 million has been pledged to projects ranging from technology and publishing to art, restaurants and film. Already this year, several projects have raised a million dollars or more and have spawned successful products.

"More than 18,000 successfully funded projects came to life because of Kickstarter."

Kickstarter spokesman Justin Kazmark says the company was founded on the idea that there is value in ideas beyond making money. But the site helps connect creative entrepreneurs with a supportive audience.

"What we've seen so far is more than 18,000 successfully funded projects come to life because of Kickstarter," Kazmark said. "It's all about these communities of people that are gathering around an idea and helping them come to life. A lot of times the thing that's trying to be created doesn't even exist yet."

Platforms like Kickstarter have the potential to be localized to let communities support local business ideas they believe in, said Scott Turn, vice president of Security Bank USA in Bemidji.

Turn said startup loans are among the riskiest loans out there for banks. Banks might be more willing to loan money to new businesses like the Bemidji Brewing Company when they can show strong public support.

"As a banker you see that people believe in them, that they have some personal investment into this. So, although they're still a start-up they've developed some confidence for anyone looking to be a financing partner."