About two weeks ago, Local Harvest Grocery, Café & Catering launched a $120,000 crowdfunding campaign that co-owner Maddie Earnest says was necessary to restock the grocery store and pay off debts acquired as a result of a failed expansion in Kirkwood. The community responded and fully funded the campaign in six days.
We talked with Maddie Earnest about the overwhelming response and how she plans to move forward after the failed expansion.
“We’ve completed step one for us, which was bringing in the money to be able to kind of pay off some immediate crises. And the second part for us is to bring in an equity partner. And we are fortunate to have a team of people who is working pro bono with us to work us through that process,” Earnest said.
While the successful campaign reflects a community invested in the future success of the business, some have been critical of how the funds will be used.
“I think it’s always easy from the outside to look in and to make criticisms,” Earnest said, adding that “along with the criticisms we’ve had just as much support for the fact that sometimes you dream big. And our vision for moving and expanding was always to create a market where we could allow greater access for people to buy local products.”
Earnest said that more than 1,100 people participated in the crowdfunding campaign, contributing on average $100. For every $100 contributed, they will receive either a $110 gift certificate to be used in 2015 or a punch card valued at $10 a month for a year, which can be used immediately.
If she had it to do again, Earnest said the only thing she would change would be to launch the crowdfunding campaign sooner. And for other businesses facing financial difficulty, she recommended reaching out to the St. Louis community for ideas and support.
“In your darkest hours sometimes you can have your most creative solutions come,” she said. “There are people out there who want small businesses to succeed and who will work with you.”
Later in the show, we expanded the discussion to talk about the environment for local business in St. Louis. Our guests included:
- Cliff Holekamp, Director of the Entrepreneurship Platform at the Olin School of Business at Washington University in St. Louis
- Katie Lee, Founder and Owner of Katie's Pizza and Pasta in Rock Hill. Last year, Lee raised about $40,000 through Kickstarter.
- Steven Marciniak, Co-Founder & CEO of TrakBill, a St. Louis start-up that has received funding from a variety of sources including an Arch Grant and venture capital fund.
Business professor Cliff Holekamp began the discussion by lauding Local Harvest for using crowdfunding in a way that made sense. As a consumer-based business, crowdfunding with a reward of a gift certificate not only adds to a business’s capital, it also provides future customers.
He said with consumer businesses, the marketing value of crowdfunding can be greater than the value of the money raised.
Such was the case with Katie Lee, who opened Katie’s Pizza and Pasta in Rock Hill three months ago. While the $42,000 she raised through Kickstarter represents only 8 percent of the money needed to begin business, she said it helped connect her with other investors and created “buzz” about her new restaurant.
Crowdfunding is not something to be undertaken lightly, however, said Holekamp.
“People underestimate the amount of work it takes,” he said. “There can be a lot of complexities when people are buying in to something new, sometimes they don’t understand what they’re buying.”
If you do begin a crowdfunding campaign, he said, “Play to win. You should never just throw out a campaign and see what happens. That can reflect negatively on you as a manager.”
In addition to crowdfunding, St. Louis has other funding available for small businesses. Steven Marciniak made use of several them to fund his start-up TrackBill, a website that allows users to track proposed laws as they makes their way through the legislative process.
After a rough start that included sleeping on a friend’s coach and selling his plasma, the company got its first break a year ago when it received seed money through the Capital Innovators Accelerator Program. That was followed by $35,000 in angel investments, an Arch Grant and finally venture capital funding from Cultivation Capital.
“The accepted thing a few years ago was St. Louis is down and out, not much is happening. And since then a lot of start-ups have come in due to the influx of not only capital but also different individuals in computer science and engineering and in business,” Marciniak said. “So that has all come together at the perfect time to really create this atmosphere where things are happening, people are excited about St. Louis, and we’re growing jobs and attracting more talent as it continues to snowball.”
*A previous version of this story incorrectly stated that more than 11,000 people participated in Local Harvest's crowdfunding campaign. The correct number as shown above is 1,100.