How Northbound Smokehouse & Brewpub Built a Business on Free Beer

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On a pleasant summer afternoon in 2019, a young man walked into Northbound Smokehouse and Brewpub. Inside the pretty, redstone building in south Minneapolis, the bartender waved hello and poured a beer from one of the brewpub’s array of sparkling chrome taps. He smiled a thank you, grabbed his glass and found a seat. 

An hour later, the customer drained the last of his beer and left—without paying. In fact, he hasn’t paid for a beer in over five years. This young man is one of 118 people who helped get Northbound running in exchange for a lifetime of free beer.

How to Borrow Money When There Isn’t Any

The brewhouse’s founders, Amy Johnson and Jamie Robinson, started planning the business back in 2011, just three years after the Great Recession tore apart the US economy. Business had rebounded a little but unemployment was still high and the stock market was looking shaky.

When the two entrepreneurs went to their bank to request a business startup loan, the nervous lender demanded $220,000 as security. That was money they simply did not have.

Reluctantly, Johnson and Robinson turned to friends and family to ask for cash for the down payment. "They were, like, 'I've got a few grand, but I don't have too much money,'" Johnson told The Atlantic in 2014. That was something she heard again and again and it gave her an idea. “Why not just take a couple grand from everybody and then we'd have all the money we'd need?"

The idea seems pretty straightforward now, but back in 2012, crowdfunding was still in its infancy. Platforms like Kickstarter and Indiegogo did exist but few projects raised anywhere near the $220,000 Johnson and Robinson needed.

So the two sat down (presumably over a beer) and designed their crowdfunding campaign. They sketched out three options: $1,000 for free beer for life; $1,000 for 0.1 percent equity in the business; and $5,000 for free beer for life and 0.5 percent equity. To the beer-loving pair, it seemed like a good idea—they’d probably even invest if they could—but neither had any idea how the general public would react.

Kickstarter and Indiegogo both banned alcohol rewards, so they had to manually manage their campaign. But that little hiccup didn’t stop them. They locally published their fundraising offer in 2012 and waited for the enquiries to trickle in.

Within a couple of hours, their email inbox was overflowing with local residents and craft beer enthusiasts looking to take part. In a few days, the inventive pair had secured the full $220,000 from 118 generous investors and officially closed the campaign. They took the money to the bank, secured the loan and opened their dream brewpub in September 2012.

Cultivating a Community with Crowdfunding

Johnson admits that she was worried about the public response to Northbound’s offer. If all 118 investors turned up every single night, they would drink the brewpub out of business in a matter of weeks. As it turns out, there was no need to worry.

As of opening day in 2012, Northbound’s bartenders have poured just 17 free beers a night. At a cost of 40 cents per beer, they’re shelling out just seven bucks every shift—not bad for the $220,000 they raised to jumpstart their business. 

That seven dollar investment plays an important part in developing a strong sense of community for the brewpub. Each of Northbound’s 118 backers invite friends, have food and order other drinks not included in the deal. As Johnson explained, that seven bucks a night buys them “an army of over 100 people who are our cheerleaders."

The buzz around Northbound is so prolific that Johnson is constantly turning people away, even several years later. "We do get asked about it, every day, still,” she told Splinter News. “Every day somebody asks one of our staff members if they can still get in on this, which feels great. It means people love the beer and want to be a part of it."

The Power of a Great Idea

Northbound’s success has created a roadmap for other businesses looking to bootstrap their idea and build a community. After seeing cold brew coffee take off in the US, Joe Devereux-Kelly decided to bring the coffee trend to the UK, launching his own business called Cool Cold Brew

In 2017, after 18 months of product development and small-scale selling, Devereux-Kelly hit the limits of traditional finance. His overdraft was empty, his credit cards were maxed out and banks refused to lend to him. He decided to list the company on investment crowdfunding platform CrowdCube with an ask of $130,000. The response, says Devereux-Kelly, was fantastic. In just over four days, 479 individuals invested in the business. The enthusiastic response helped him exceed his fundraising target by 60%. 

Like with Northbound, the campaign wasn’t solely about the money. Devereux-Kelly had enough industry experience to know that new beverage brands lived or died on the support of their community. “Crowdfunding effectively allowed us to establish our first proper community,” said Devereux-Kelly. “It’s a community of over 470 people, who all believe in our business, values and products.”

Balancing Risks and Rewards

It’s important to note that things aren’t always that easy. According to Aidan Cramer, CEO of JobLab, crowdfunding isn’t an instant route to an engaged community. “You can’t simply sit back and rely on your community or anyone else,” explains Cramer. “You have to make sure you’re talking constantly to investors and potential investors about what investing in your company means.” 

Cramer says he approached his own crowdfunding campaign like a constant conversation. He wrote articles, engaged with potential investors over social media and stayed transparent about what sort of company he was trying to build.

With one campaign behind him, Cramer admits that running a successful crowdfunding campaign is tougher than it looks. After all, you never hear about the thousands of campaigns that fail every day. 

But if you get it right, the results can be life-changing. On May 1, 2019, when JobLab’s crowdfunding campaign closed, Cramer had an extra $400,000 in his bank account and an army of engaged brand champions behind him.

Image Credits

Feature Image: Unsplash / Amie Johnson
Image 1: via Northbound Smokehouse and Brewpub Facebook Page