The founders of Colorado Sake Co. are, naturally, big believers in the future of the rice-based Japanese spirit.
In spite of the COVID-19 pandemic, the Denver company doubled its 2019 revenue last year and is pursuing a novel way of financing its next stage of growth. It’s selling shares in the company through the online platform StartEngine and wants to be at the forefront of the sake market’s expected growth.
“We could slowly grow but why not grow quickly and have owners for life and regulars for life and then just give it back to the people?” Colorado Sake Co. co-founder and CEO William Stuart said.
Through what is called a regulation crowdfunding, or Reg CF, offering, Colorado Sake Co. is selling shares for $1 apiece, with a minimum investment of $250, per its StartEngine page.
Established under the federal Jumpstart our Business Startups (JOBS) Act of 2012, regulation crowdfunding offerings allow people who are not accredited investors to buy in, giving startups access to a wider range of would-be backers. The outlet for raising capital allows companies like Colorado Sake Co., which Stuart said previously sought but didn’t find support in the venture capital community, to turn customers into investors.
“We’ve had people come into the taproom and say they’re investors,” Stuart said. “They’re there. They can see we’re busy. It’s a great feeling. Plus VC money comes with so many strings attached. These people get to be alongside our growth.”
In the eyes of Joe Daniluk, another business owner that has used StartEngine to raise money for Denver-based company flood mitigation company WaterBlocks, the JOBS Act is “really the most amazing thing that has been done by Congress.”
WaterBlocks’ core product is an interlocking system of portable, plastic flood-control barriers. The company’s now-closed StartEngine offering raised just over $574,000 from 1,258 investors but Daniluk is in process of transferring over to a new intermediary, TruCrowd.com, to continue raising capital.
After launching its offering on June 22, Colorado Sake Co. has raised more than $172,000 from 2,017 investors as of Friday morning.
The maximum amount the company can raise as listed on the page is $1.07 million. As outlined in a StartEngine blog post in March, the Securities and Exchange Commission moved the upper limit on the amount of money a company can raise through regulation crowdfunding to $5 million this year.
StartEngine representatives declined an interview request, citing regulations that dictate the company can’t highlight individual companies with active investment opportunities on its platform. The company says it has hosted more than 500 successful offerings bringing in more than $350 million; its platform has more than 500,000 users.
Stuart said StartEngine reached out to him about listing on the platform.
StartEngine valued Colorado Sake Co. at $12 million. The company charges between $4,000 and $10,000 for a financial review of companies, then collects between 7% and 12% of the capital raised through regulation crowdfunding offerings — with an additional $10,000 collected at the close of an offering, according to its website.
The infusion of capital is coming at a critical time for the sake brewery. Beyond its taproom at 3559 Larimer St., which hosts standup comics and started serving sushi during the pandemic, the company moved its brewing operations to a facility on North Garfield Street six weeks ago. There, Stuart and business partner Heather Dennis are perfecting a sake-based hard seltzer that’ll be available at Whole Foods locations around Colorado in August, Stuart said.
“Obviously, the seltzer boom is here to stay but if we can get into that conversation around sake, it just further promotes the industry as well and puts us in a different spot in liquor stores,” Stuart said.
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