Crowdfunding can be a great way to raise money for a new (or existing) business. Whether financing restaurants on wheels or a new product , we’re exploring the different roads to crowdfunding success of small business owners—and what happens after the campaign is over.
“Bacon started everything,” says Chris Walters, chef/owner of the soon-to-come Das Wafel food truck in Buffalo, NY.
He’d grown up around pork, cooking alongside his dad from the age of six. He grew up to be a classically trained chef with a passion for BBQ and entrepreneurship.
Walters set up his own 25” keg smoker to cure meats, and decided to develop his own bacon recipe. After refining it for more than a year, he test-marketed it to friends and family. Within 36 hours, he had sold 60 lbs of freshly-cured bacon—far more than expected. Encouraged, he started working on a business plan.
He quickly found out the regulations for selling a retail food product are far more strict than the rules for operating a restaurant. Running a food truck that sells bacon would be easier than selling it online. But where to get a food truck?
Then, a colleague emailed him a photo of a food truck listed for sale on Craigslist. “Actually, it was more like the beginning of a food truck,” says Walters, who needed about $25,000 to turn the bus into a functional mobile kitchen.
Making Funding Choices
To get the money, “I talked to banks,” Walters says. “They laughed.” He was told that food service businesses and restaurants are “not looked upon favorably” in the traditional financing community. So he started researching nontraditional options, and narrowed his choices to:
- Peer-to-peer lending
“Kickstarter seemed the most business-project oriented,” he says, which is why he opted to create a campaign there. He was initially planning to ask for $10,000, but realized that it wouldn’t be enough to convert the truck. So he bumped up his goal to $25,000, and launched the campaign.
The Kickstarter campaign lasted 30 days, and Walters didn’t waste any time in promoting it. He alerted all of his current BBQ and bacon customers, announced the Kickstarter initiative on social media, and shared his goal with family and friends. But his efforts only yielded about $15,000, leaving another $10,000 to meet his goal.
The campaign was scheduled to end on a Friday, so on the Wednesday before, Walters hosted a bacon tasting party. He invited everyone he knew, ran Facebook ads, boosted Facebook posts, and hit social media hard. His marketing paid off: several media outlets showed interest in attending — which was lucky, because on the day of the event, the campaign was still at only $15,000 raised. “At that point, I didn’t think we’d make it to $25,000,” he says—which, according to Kickstarter rules, meant that Das Wafel would get $0.
Just as Walters was close to admitting defeat, the media, who were impressed by the tasting party offerings, came through with positive coverage of Das Wafel’s bacon. Outlets including Buffalo Eats, Buffalo Rising, Step Out Buffalo, and Buffalo’s Business First all ran stories, which Walters promoted through his networks to help last-minute money flow in.
By lunchtime on Friday, Das Wafel was fully funded, at $26,714. After Kickstarter deducted its 5% fee and Amazon took its cut, Walters received around $22,000.
After the Campaign
Few Kickstarter campaigns succeed without some enticement for donors, and Walters’ was bacon. But he regrets that now, admitting he didn’t do an adequate job of investigating perishable shipping requirements before promising to send bacon to donors. The rules and regulations surrounding the shipment of fresh food are complex and restrictive, he quickly learned – much more so than he had imagined.
Of the $22,000 he received, Walters spent $16,500 making the truck operational, and an additional $5,000 on equipment. He kicked in $5,000 more of his own money to get the rest of what he needed, including building a new smokehouse.
Advice and Takeaways
Walters’ advice to entrepreneurs contemplating crowdfunding? Have at least 10% of your project value to start, in savings, so you can add it to the crowdfunding pot if you haven’t reached your goal; that money can make the difference between collecting all your donated cash or not. “If you don’t have that 10%, you don’t have a plan, you have an idea,” he says.
As far as the time commitment, “it’s a full-time job doing a Kickstarter campaign,” he says. Between the constant social media posting and marketing, curing meat to send to donors, and the prep and shipping of packages, Walters worked extra long days. The stress of not knowing if his campaign would be fully funded also took its toll.
Still, Walters would use crowdfunding again – he just wouldn’t reward donors with bacon.
“I have no regrets,” he says. “Das Wafel wouldn’t be happening otherwise.”
For now, however, Das Wafel is on hold. With some mechanical and exterior work still to be done on the truck, Walters elected not to pursue summer food truck contracts, which would have required more upfront cash. His goal is to open for the summer of 2016.
For more information about how to successfully crowdfund your business, check out our Business Owner’s Guide to Crowdfunding.