How the Crowd Helped Two Women Launch & Fund a D.C. Distillery

It all started when Pia Carusone was about 2 years old and Rachel Gardner was just a baby. Their families were close, so they grew up celebrating holidays together and traveling together. As adults, Pia pursued a career in politics in Washington D.C. and Rachel found herself in Seattle working on sustainable and natural resource development. Though they were physically apart on opposite coasts, the two remained close friends and often talked about starting a business together. As children, their business ideas consisted of things like ceramic bead making, but in the early 2000s they started to notice how craft spirits were beginning to take hold in the U.S.

“We all know craft beer and its impact on the culture of drinking, and so we thought, wouldn’t it be fun to do craft spirits?” Pia remembers.

The idea of starting a business together was a constant theme in Pia and Rachel’s conversations, but what used to be a thought discussed in passing became a potential for reality one fateful day in 2011. Pia recounts, “I was Chief of Staff for Representative Gabrielle Giffords in Tucson, Arizona when she was shot, and everything in my life changed. I realized I didn’t want to delay this project any longer, and I wanted to see if we could make it happen. That was the catalyst for us to make it happen.”

Preparing for Crowdfunding

Pia and Rachel immediately got to work, taking classes, attending conferences and meeting with other distilleries. Between the two of them, they toured nearly 100 distilleries. In the summer of 2013, they decided that Washington D.C. was the place to open their own distillery. Signing the lease on the building that would become Republic Restoratives was the first step when they realized that there was no turning back.

“We opened in May 2016, so it was a three year process. In those years, we realized we needed an incredible amount of funding, and looking at how other distilleries did this, we realized we were pretty unique. Most other successful distilleries find their funding through family funding or private wealth, or they’re descendants of major distilling families. For example, in Kentucky, almost all craft distillers have some sort of Jim Beam relation,” Pia explains. “We had none of those things.”

Beyond not having access to the common sources of funds many distilleries have, Pia and Rachel realized that a lot of the distilleries they visited had an air of secrecy about them. “The story of Pappy Van Winkle always came up – it’s the most coveted American bourbon out there. The story is a tale of secrecy and lure and family conspiracies and stolen barrels, and we found that the truth is that it’s all a lot of hype,” says Pia. “You’ve got all these secret recipes and they’re not going to fully let you know how it’s all done because it’s part of the brand. Basically what we felt was a really obvious lack of transparency, which we didn’t like. So that led us to this point of, okay, how can we let people in our lives know about this? How can our families, friends, neighborhood and community know about this? That’s what led us to crowdfunding. The desire to raise money from the people who are closest to us and this project, and who have an actual interest in it, and allow those people to participate.”

Republic Restoratives on Indiegogo

Pia and Rachel launched their perks-based Indiegogo campaign on Kentucky Derby Day, May 2nd, 2015. They raised more than $119,000 from 680 people, demonstrating the strength of their engaged community, and became the largest crowdfunded distillery in the U.S. Thanks to the success of their perks-based campaign, they started garnering a lot of interest from the press. And thanks to all the press attention, they suddenly became a lot more interesting to traditional forms of money, such as banks and VCs.

“We had met with a local community bank and they couldn’t have been less interested. We had no credibility. After our Indiegogo perks campaign, the bank was all of a sudden interested. And traditional equity investors were interested. But we wouldn’t have been interesting to either of those without the Indiegogo campaign,” says Pia.

After the perks campaign ended in 2015, they started spending all the money they had raised to get their idea off the ground. Republic Restoratives opened as the first women-owned distillery in Washington D.C. in May 2016 and was greeted with resounding success. Not only were they voted “Best Distillery in D.C.” by a reader’s poll in the Washington Post, but they’ve generated nearly $115,000 in sales to date.

Something else happened in May 2016 that would shape Republic Restoratives’ future. The U.S. government passed Title III of the JOBS Act, allowing anyone, not just wealthy accredited investors, to invest money into the startup companies they care about for potential financial returns.

Fast forward to November 2016. Pia and Rachel had made huge progress in bringing their dream to reality, but also realized that they would need to secure more funding to continue. At the same time, Indiegogo and MicroVentures had teamed up to launch First Democracy VC, an equity crowdfunding portal for startups. Republic Restoratives became one of first companies to list as an equity offering on First Democracy VC, raising their maximum funding goal of $300,000 in just 57 days from 591 investors. With 25% of all investments stemming from the greater D.C. area, it’s clear that the idea of a community distillery was solidified through the revenue share deal.

“Our business was on the internet now. We thought that there was nothing to hide, and we’ve been super honest about the process and the time it takes for the business to become profitable,” Pia shares about the equity crowdfunding experience, “We put it out there and weren’t sure what was going to happen. We were absolutely floored and really, really honored by the response. We capped at $300k and and that money is really going to help us in the next phase, not just geographically but with our product line.”

Pia and Rachel currently have two products out: Borough Bourbon and CIVIC Vodka. Both were offered as perks in the equity offering campaign, and thanks to the success of the campaign, they hope to release up to five products by the end of 2017.

“The equity route is serious. You’re making a financial commitment to the public that what you represent is true, and there are upfront costs to that. You can’t just up and do this quickly. I’m very glad we did the perks-based campaign first; in fact, even if equity was available at the time we would still do the perks campaign first,” Pia states.

Equity Crowdfunding vs. Perks-Based Crowdfunding

Pia’s advice to other early stage companies considering crowdfunding? “Put yourself through this process. See if you can garner interest from your closest friends and family before you spend the upfront cost on equity. The difference between an equity campaign and a perks campaign is that with equity, you owe people some financial return. They’re not doing it out of the good of their heart, but rather because they see a financial upside. It’s easier to fulfill on a T-shirt or tote bag than it is on a financial return.”

With the potential risks and implications in mind, Pia still believes equity was the ideal route for her and Rachel. “We’re in this early stage, not quite startup, situation, and we’re going to need a lot more capital over the next few years. The equity model is terrific. It’s saving us from having to go out and give away a ton of the company to a VC firm, or take on debt through bank loans. It’s also this huge, built-in network of supporters – collectively between the two campaigns we have thousands of people who have invested in us and want us to succeed. These are customers.”

Republic Restoratives is the first women-owned distillery in Washington D.C., and is the largest rewards-based crowdfunded distillery in the U.S. to date. Watching these women turn their dreams to reality, from their first perks-based crowdfunding campaign in 2015 to their successful equity crowdfunding raise in 2016, is truly inspirational and clearly demonstrates the power of community.

To this day, Pia and Rachel are humbled by their community of supporters. Pia shares, “The number of people who come in to buy a cocktail or a bottle and tell us, hey, we were part of the perk campaign or the equity campaign is incredible. It’s really incredible.”

 

Indiegogo co-founder Slava Rubin and Republic Restoratives co-founder Pia Carusone will be speaking at the American Distillery Institute’s Annual Craft Spirits Conference in Baltimore, MD on Wednesday, April 5, 2017 from 12:30pm to 1:30pm EST. Learn more about “How We Crowdfunded Our Distillery From The Ground Up.”

To learn more about Republic Restoratives, visit their website or review their offering page.
Learn more about equity crowdfunding on First Democracy VC, presented by Indiegogo and MicroVentures.