This Founder series post features Pyynikin, award-winning brewery, funding innovator and long-time Capdesk user. Based in the city of Tampere, Pyynikin is on a mission to bring Finnish craft beer to the World. To date, they have attracted more than 2000 investors to become part of the company. I spoke to co-founder Rauno Pere about their journey. Read and be inspired for alternative ways to finance your business.
Hi Rauno, thanks for taking the time to participate in this founder blog. What is the short story behind starting Pyynikin?
It was 2012. My uncle Tuomas was tired of his job and looking for something new to do. He had been brewing beer for years as a hobby and had, for some time, been thinking about starting his beer brand. He asked me if I wanted to join. I was still at university, studying a bachelor in business administration. But, I was intrigued by the offer and committed myself. From there it went fast. I dropped out of school and started working full-time. It’s been a great ride since.
The company started with 400 shareholders from the first day. How did that happen?
It was quite a coincidence, to be honest. We had started sharing our vision of a Tampere based brewery with people in the local community. A journalist got ears on the story and mentioned us in an article about a local bar. The article received a lot of attention in Tampere and people started calling and writing us with investment offers. We did not know about equity crowdfunding back then. The fundraising just happened, and we thought it was a good idea to include the local community as shareholders.
Wow, that sounds easy. Since then you have tried a couple of different funding vehicles. One of them was equity crowdfunding on Invesdor. What did you think about that?
Well, it hasn’t been easy. But, yes, we have been using different kinds of financing. A brewery is a cash-intensive business. You need a lot of materials, equipment, storage etc. and if you want to grow faster than what’s organically possible you need external capital. After the first year, we needed more cash, and I was looking around for different opportunities. I came across Invesdor (a Finnish equity crowdfunding platform) and found their offer appealing. We had already done the first round of financing through a similar method and had good experiences with our shareholders.
We successfully raised €250K. It was a good experience, and I liked working with them. They have grown a lot since 2014, and we are currently considering another campaign on their platform.
I thought that you would facilitate all future fundraisings on your platform.
We are doing most our self but would like to see if a crowdfunding platform can help us reach investors outside our network. We are pleased about our investment platform. However, creating awareness is costly. It is a constant PR and marketing effort.
Why did you develop your fundraising platform?
The motivation comes from the pricing of equity crowdfunding. It is costly to use these platforms. Especially if you are raising larger amounts. From what I remember, Invesdor was charging 5-10%. The cost can quickly become tens of thousands of euros. The outlook of paying up to €100K in commission on our current financing round made me think that it was better to develop our platform.
How does your platform work?
We are using the principles from equity crowdfunding: Hosting the investment campaign with a visible track bar on our website. The process (simplified) is as follows: 1. Potential investors register their interest on the website 2. We verify their identity 3. Send them an invoice for the investment amount 4. Register the investment with the Finnish business authorities 5. Invite the investor to our Capdesk where his ownership of the company is listed.
We have raised €800K and only paid the upfront cost of developing the platform, less than 2% of funds raised. Another advantage of this method is that we can run fundraisings for longer periods than 60 days which is usually the norm on equity crowdfunding platforms. Our current round is open from May 15th, 2016 to December 31st, 2017.
So Pyynikin is now a brewery operating an investment platform for continuous fundraising. Can you share some of the challenges you had?
We had experience with crowdfunding, so we had a good understanding of what we wanted to build. However, doing things for the first time can be difficult, and different things are impossible to foresee. The software had bugs and at times did not work as intended. All these small things that are difficult without experience.
Operating our investment platform is working for us because we have an existing network and a lot of support from investors. I would not recommend this solution for companies raising their first round of financing. It has to make sense strategically. Crowdfunding platforms are useful for entrepreneurs who are doing first time fundraising. They have the framework in place. They can ensure smooth processes in payments and listing of shareholders. Practical things like that are valuable and save you time.
How are you keeping shareholders happy?
Investing in Pyynikin is not just about the money. It is also about being part of the family and following the development of the business. We have 2000 investors. They invested because they like the product. They are fans of the company and want us to succeed. They spread awareness and help to sell the product. That’s something we appreciate and want to build on. We have a multi-channel strategy that entails online media, events and special offers.
Most community building is taking place online. We are using Capdesk for official communication to shareholders. At our size, it is essential to have an official channel. Besides Capdesk, we have a very active Facebook group used for informal communication. One of the several activities in the group has been crowdsourcing opinions on label designs. The group is perfect for such things, and shareholders like to be part of it.
Other investor related initiatives are events such as tastings. We recently invited shareholders to be first to taste our upcoming cider. Finally, we are doing special offers for beers and merchandising. I think all of these things are coming together to create a feeling of belonging in Pyynikin.
You mentioned that some shareholders sometimes are working for Pyynikin. What are they doing?
They are doing different tasks. It was mostly in the beginning. The jobs they perform are things like bottle labelling, painting around the factory and other small manual tasks. Some of them get paid a little for their services -especially if they have been doing a lot of work. But it is mostly volunteering.
That ‘s incredible commitment. Isn’t there any downside to having so many shareholders as a young company?
Well, sometimes it can be difficult to have so many eyes on you all the time. You have to act with high integrity and take care of the business properly. There are no shortcuts.
What are the next goals of the company?
We would like to grow internationally. We are exploring most markets, and have sent samples to every continent. China and United States looks like promising markets. But to start exporting we need scale. We are currently focusing on scaling capacity to 20 million litres a year. With the new increased capacity, we can bring down production cost and sell beer at a lower price. The lower price is essential for our ability to access new markets, especially when adding shipping costs.
If you had one wish for Pyynkin what would that be?
For now, I would like to close our funding round so we can move faster on all our plans. We are currently missing €700K of €1.6M. I know which equipment to buy and the suppliers are waiting for the order confirmations.
Why should I invest?
Because we are a great company, making the best beer. We are the fastest-growing brewery in Finland and the outlooks for the coming years are excellent. Revenues are currently at €1.7M. Production capacity is the barrier for growth. With that in place, it’s our ambition to reach revenues of €10M in 5 years. Next year, 2018, looks particularly promising. I am expecting a great leap forward with revenues of €3M.
And remember to check out our award-winning seasonal lager. When you taste it, you want to become a Pyynikin shareholder.
Follow Rauno’s recommendation to try Pyynikin’s beer. Can be bought here:
Become a shareholder in Pyynikin: