As of this week, crowdfunding merged with investing in the US, thanks to last year's changes to financial law by the Securities and Exchange Commission (SEC). Title III of the JOBS Act allows a company to use crowdfunding platforms to sell as little as $100 worth of securities to anyone willing to take on that risk, even non-accredited investors.
Lo and behold, Seattle's own Rodeo Donut is one of the first companies to test the new system on WeFunder, which just launched yesterday.
Naturally, Rodeo Donut is trending on the site — after all, what self-respecting holder of a hundred dollars wouldn't click on the tagline "Gourmet doughnuts served with fried chicken and whiskey" accompanying a salacious frosted doughnut photo?
The brioche business, which began as a Cupcake Royale pop-up and occupies niches within locations of that mini-chain, has raised $2,750 in its quest for $50,000 to open its own brick and mortar this year, and you can help.
"Our plan is find a location in Seattle's best neighborhood so we can instantly increase sales with coffee, fried chicken, farm fresh sides and a thoughtfully procured drink menu," co-founder and chief operating manager Nicki Kerbs writes in her pitch. "Being able to break it out of 'pop-up' stage would help us more than triple our sales."
In a Q&A section, Kerbs and business partner Jody Hall (also founder of Cupcake Royale) get into the nitty gritty, detailing operating costs (20 cents labor and 32 cents ingredients for a filled doughnut), margins (79 percent for a $2.95 doughnut), growth rate (2 percent each month since launch), and more, including a tally of doughnuts sold since launch (45,847 — that's a whole lotta dough).
For the company, it can acquire many small investments without being directly beholden to the investors. What's in it for you? Well, not necessarily much, and certainly not soon. The WeFunder FAQ is clear in its insistence that you should not invest in start-ups to make money, since start-ups are risky and likely to fail. "Everyone has their personal motivations for investing in startups but ours is to support founders we believe in, pursuing a vision we care about, with a good chance of earning a return should that vision transform into reality," the site explains.
WeFunder co-founder and CEO Nicholas Tommarello tells Eater, "I think a typical deal for a restaurant will be something like investing $500 in a low interest rate loan, and getting $500 in free food. It's a win for both the restaurant owner and the investor."
That said, if you invest rather than loan money and the company hits it big and goes public, you could sell off your stock for a solid return — years from now. In the case of Rodeo Donut, which is selling shares at $1 per unit, the pastry company has also set perks for each investment tier, similar to reward levels for Kickstarter: Invest $500 and get a t-shirt and one free doughnut per month for the first year after the brick and mortar opens. Bump it $1000 and add a free drip coffee per month, and so on.
It's a brave new world, one in which you, too, can possess a small piece of a doughnut, fried chicken, and whiskey shop, a combination that sounds destined to rule the world. By all means, potential investors, share your thoughts on the matter in the comments.