Crowdfunding foodies raising lots of dough
Many restaurants are now turning their backs on the banks when it comes to seeking finance and using their customers, family and small-time investors to fulfil their food dreams. Our reporter finds out why
Published 19/06/2016 | 02:30
When Cornucopia founder Deirdre McCafferty was refused planning permission to expand her Wicklow Street restaurant in 2008, she asked customers to sign a petition that eventually convinced Dublin City Council to change its mind.
Eight years on, as the Celtic Phoenix takes full flight, the mother-of-two is once more harnessing people power to help broaden her vegetarian empire.
Retailing at €3.95, Cornucopia's 'Green Goddess' - infused with apple and the ubiquitous avocado - is just one of the trendy cold-pressed juices new to shelves here after the company successfully crowdfunded €50,000 in only 48 hours.
Meanwhile, back at the city centre eatery, eagle-eyed regulars may have noticed the shiny new service counter, also installed no thanks to the banks recently.
"We were in something called Food Works [a business programme run by Bord Bia, Enterprise Ireland and Teagasc] with our juice product and they recommended crowdfunding," explained Deirdre, who set up the health-food-store-turned-wholefood restaurant with her late husband, Neil, in 1986.
"I had some experience of working with the crowd because when I was turned down for planning permission to turn the building beside us from retail to restaurant. I went to my customers and I got a petition going. Two thousand people signed it [saying], 'Please give her planning permission', over a two-week period," says Deirdre.
"I thought of that, and I thought that was 'crowd'. I got the crowd behind me - my own customers."
Determined to set the juice loose, but not banking on getting another loan, this time round the businesswoman decided to ask fans of the brand to stump up more than just their signature.
Instead, they were invited to sign up to 'crowd-lending' service Linked Finance, where they could bid on loaning the company cash at their chosen interest rate during an online auction.
With everyone from her electrician to her aunt clamouring for a slice of the pie, within two days the loan was fully funded - twice over.
"We wanted €50,000, but actually the bids that came in equalled €100,000, so €50,000 of the higher interest rate people got knocked out and it came out at 7pc [interest]," says Deirdre.
"We ran a campaign and told people what we wanted to do. We put posters up all around the restaurants and on every table.
"The electrician bidded, the suppliers, the customers, the staff, friends of mine, so many people. Everybody is emotionally involved.
"To see the loans coming in was very exciting for us that night," she adds. "It is dearer - more interest - than your bank. But it seemed less boring than going to a bank and it was a wonderful marketing opportunity.
"You're really putting your name out there. Now the people who lent us money are being paid back regularly."
But Cornucopia isn't the only one turning its back on the bank.
Since facilitating its first loan three years ago, the Irish company has helped more than 500 small businesses here borrow €20m from members of the public. "We have 12,000 members of the public [on the site]," says Peter O'Mahony, who founded Linked Finance in March 2013. "It's just regular people who want to support and lend to small businesses.
"Basically, the way it works is we would sit down with the business and they tell us how much they want to raise. Then we do full credit checks and all the boring stuff the bank does.
"The auction tends to run for something like 10 days [so that] businesses can engage as many friends, family and customers at possible. Typically, they end at nine o'clock at night because we like the idea that somebody can be sitting at home watching TV with their iPhone in their hand and still bidding to be part of the auction.
"Basically, you'll get 36 repayments back over the next three year," he continues, "so you're like a bank."
"At the end of the day, what you're actually getting back is not just your money, you're actually getting an interest rate on top of it. There's a bit of fun in doing the whole thing."
As a former bank worker, pensioner Patrick Crowley from Tralee knows all about both borrowing and lending.
Since joining the online crowd-lending community, he has dipped into his life savings to give dozens of Irish businesses a dig-out.
"I've always had an interest in mathematics and was always investing in shares," the dad-of-six tells Review.
"It was fine when you got a reasonable rate on your savings with banks. But the last couple of years, you wouldn't want to really be in shares, because it goes up one day and down the next, same with the currencies. So I did a bit of investing [in crowdfunding] outside the country and then I watched Linked Finance for a bit. Now I have over 90 loans and my average [interest] rate is 12.7pc.
"It sounds like an awful lot, but I invest small amounts to cover myself," he says.
"At night-time, you can just sit down for half an hour and see what's coming up in the Live Loans and see if there is anything you fancy.
"You can invest from €50 upwards. What I've done, I've spread the risk, because you still have to regard it as a risk. If a company went belly up, at the minute the most I would lose would be €250."
With the global crowdfunding market reaching $34.4bn in 2015, Coppinger Row and Lolly & Cooks in Dublin, as well as Nash 19 in Cork, are just some of the other high-profile establishments to successfully raise dough on the website.
According to Linked Finance, "99pc" reach their target, but not every crowdfunding campaign gets over the line.
After last year failing to secure funding through Kickstarter - a massive American crowdfunding platform - chef JP McMahon was forced to put plans for his new field-to-fork-style fast-food restaurant, Farmer, on the back-burner, but hasn't ruled out giving crowdfunding another go.
The restaurateur - who also runs the Michelin-starred Aniar, Cava Bodega and EAT Gastropub in Galway - says: "We sought to raise €100,000 and we raised €10,000. Unfortunately, you only get 60 days - the amount was too big and the time was too short. If I was to look again, I might try and raise €20,000 to €30,000, because the time period is the learning curve.
"It takes a good while to get the traction going on it. You only really get going and then the campaign is nearly over.
"As far as I'm concerned, it [Farmer] is off the ground," he says. "It's just I'm not in a position to just open it anywhere because the nature of the product is trying to offer an alternative to fast-food, not so much in the food, but in where it comes from.
"We did a pop-up recently, and we're probably going to do another little pop-up now hopefully at Electric Picnic, so even though the Kickstarter failed, the idea succeeded. I think it's a very good platform for testing ideas."
Charging borrowers a 2.5pc completion fee per loan, Linked Finance boss Peter - who is also behind Dublin's Laughter Lounge - reveals how the company now aims to lend €250m to the country's top 5,000 businesses in the coming years.
"It's a really big target," he admits, "but we think it's an exciting one to try and push ahead with.
"The number-one thing that we offer that the banks just don't offer is an unsecured loan. But I think the number-one reason why people come to us is speed.
"We guarantee that anybody who applies for a loan, we will give them a 'yes' or a 'no' within eight hours. In some cases, the banks are taking eight to 10 weeks to give people a yes or a no."
For Cornucopia's Deirdre McCafferty, whose last bank loan five years ago took "months and months and months" to go through, it's about more than just finance.
"People have a stake in the business," says Deirdre. "They all feel, 'I helped to get this going'. I see it as a community of lenders. People like the idea of investing in their neighbourhood, too."