Young and Hungry

Fund Grazing

The Mothership needs repairs.

Stephan Boillon points at the dilapidated air-conditioning unit in his forthcoming restaurant and bakery. Before he signed a lease for the Georgia Avenue NW spot, contractors told the El Floridano food truck owner it would work just fine. They were wrong. His budget was blown.

Boillon figured opening Mothership would cost about $40,000—little compared to most restaurants. The former Brown’s Caribbean Bakery space came with a walk-in fridge and ovens, and Boillon and his wife and friends have taken on much of the labor themselves.

But Boillon soon realized a new 10-ton air-conditioning unit, bathrooms, and a custom bar and dining tables would cost an additional $30,000. He already had one silent investor and had funded 60 percent of the initial budget with his own money. The hunt for another investor could take months. So Boillon turned to Kickstarter, a popular crowdfunding website.

In 30 days, he raised $33,481 from 199 people. Without that, Boillon says, the restaurant probably wouldn’t have opened for another year, instead of in November. To make ends meet, he would have had to change the concept to a carryout and rent the space to five or six other food trucks for prep.

Mothership is among a new generation of restaurants turning to the masses for financial support rather than relying solely on investors or bank loans. Opening a restaurant often costs upward of $500,000, and for high-end ventures, a million or more. Wealthy investors are traditionally the main source for funds, and with their money comes an elitist sort of cachet. But new crowdfunding sites are helping democratize that process, while also lowering the barrier for who can open a restaurant and changing the dynamic with diners.

One of the first local eateries to try crowdfunding was Pleasant Pops. The frozen pop food truck’s co-founders, Roger Horowitz and Brian Sykora, launched a Kickstarter campaign in March 2011 with the goal of $20,000 (about 20 percent of their budget) for their farmhouse market and café, slated to open this month in Adams Morgan.

“We saw the opportunity to get hundreds of people involved rather than just close friends and family,” says Sykora, who funded the rest of the build-out with profits from the Pleasant Pops truck and cart and investments from family and friends. “We also knew by doing that, we would raise awareness of what we were doing.”

On the first day, they were halfway to their goal. In the first week, they’d met it. By day 30, they’d raised $26,367 from 423 backers. “I was completely blown away,” Sykora says.

Sykora and Horowitz had searched for spaces off and on for a few years. “Even if you have a good idea and even if you’ve been working on it for a couple years and building a community, it’s hard to put that on paper for a landlord or a property owner,” Sykora says.

The crowdfunding model sprung up in part due to the squeeze of the financial collapse. Small business loans have become more difficult to get in the wake of the recession; even if a business does qualify, it can take a long time for it to see the money. Pleasant Pops got a Small Business Administration loan for some of its equipment, but it took six months to come through. With Kickstarter, they had cash within two weeks of the campaign’s end.

For first-time business owners without connections or credit, crowdsourcing helps make starting up possible. Compared to the total cost of opening a restaurant, the money raised on Kickstarter is still relatively paltry, about 20 or 30 percent. But local restaurant owners who’ve used the platform say it’s helped them open faster and avoid skimping on their space and products.

Another appeal is maintaining control of the business. Boillon says he’s seen examples of investors who try to take over ownership or start big fights if they don’t see an instant profit. Kickstarter pledgers get perks, not power.

Carolyn Stromberg, who’s opening a gourmet cheese shop and wine bar called Righteous Cheese in Union Market this week, raised $45,000 from family and friends but wanted an additional $12,000 to $15,000 to have a wider selection of higher quality, more local products. She wanted to avoid giving control to investors: “I really wanted to own my business and not have too many cooks in the kitchen.” Stromberg approached banks, but interest rates were too high. Instead, she used Kickstarter to raise $13,325 from 160 backers last month.

Righteous Cheese rewards backers with a wine pairing and recipe guide, private classes, or a wine-flight combination named after them, depending on how much they give. Pleasant Pops gave posters and pop parties. Mothership offered front-of-the-line passes, pastry baskets, and a private party with a tasting menu.

Meanwhile, Popularise, a D.C.-based platform that gives residents a say in what gets built near where they live, recently launched Fundrise to allow the public to invest small amounts in real estate. Unlike Kickstarter, people who give to Fundrise own a financial stake in the properties. The first location, at 1351 H St. NE, will be home to Maketto, a food and fashion market from Toki Underground owner Erik Bruner-Yang and men’s clothing brand Durkl. Fundrise aims to raise $325,000  for Maketto, with individual shares costing $100.

Fundrise co-founder Ben Miller says typical real estate investors often don’t understand the neighborhoods they’re building in. “They’re usually older. They live in Potomac,” says Miller, whose father Herb Miller developed Gallery Place, Washington Harbour, and other big projects. “Who gets neighborhoods? People who live there. Young people who will go out there. That should be the investor.”

Attorney Janet Temko, a friend of Miller’s who invested in the H Street property, says she was attracted by the opportunity to invest in something local and tangible. She says it’s made her feel more connected to H Street, even though she lives near U Street NW: “I definitely think it would incentivize me to go out more on H Street—not just going to Maketto, but I think it’s tied to the prosperity of the whole neighborhood.”

The entire concept of crowdfunding seems well suited to the current zeitgeist; Stromberg says part of the appeal is giving power to the community, not some middleman. At a time when people are frustrated with big business, crowdfunding offers artisans a chance to thrive. It also gives people a sense that they are a part of something, creating a unique bond between customers and businesses. Crowdfunding serves a double purpose: raising money while building buzz. Users say it’s an invaluable marketing tool.

“At the farmers market, we see people coming up every week and ask how things are going with the store,” Sykora says. “They don’t just want to know when it’s opening; they actually want to know how it’s going and what’s new.”

Back on Georgia Avenue, Boillon points to the middle of the room, just beyond the busted air-conditioning unit, where he plans to hang a sign dubbed “The Motherboard” with the names of every pledger. Those who gave $100 or more will get their names branded on barstools. Boillon has made a point of putting his funders front and center.

“I couldn’t have done it without them at the end of the day,” Boillon says. “They helped build the place.”

Photo by Darrow Montgomery

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