Last year Washington, DC legalized investment crowdfunding within the confines of the District. The exemption allows companies to raise up to $2 million per year from the general public. Investors who earn less than $100,000 are capped at $10,000. The first offer has just received the green light and pop-up restaurant “Prequel” will be offering ownership in their company as they prepare to open up this spring.
Prequel is hoping to raise $200,000 representing 10% equity in the startup. As of today, according to EquityEats the hosting platform, Prequel has raised over $38,000 from 66 investors with 27 days remaining in the campaign.
The “first of its kind” food and beverage operation projects annual sales topping $5 million by targeting a high traffic portion of our nation’s capitol. Prequel predicts serving over 150,000 patrons in year one.
“Our goal is to have up to 500 investors in Prequel because we know that those investors will frequently visit, invite their friends and become brand evangelists for Prequel. Investors will receive 50% of distributable cash flow (profits) until their initial capital is returned. After that time, they will receive 10% of the distributable cash flow. Beyond the financial return, the Prequel investment provides to you, as owner, benefits such as priority reservations, invitations to the launch party, free beverages, and the management knowing who you are every time you come in.”
The combination of perks being associated with ownership is becoming a common practice. Investors can become compelling marketing vehicles as they advocate on behalf of their investment. As we all know, word of mouth counts – especially when you are talking about a restaurant. DC has become a hotbed for good restaurants. A booming economy boosted by federal spending coupled with a broad international community and multiple universities has created a vibrant and competitive dining scene.
EquityEats CEO Johann Moonesinghe commented on investing in restaurants on WaPo;
“Restaurants are unique in crowdfunding because the investors actually add a lot of value to the restaurant,” Moonesinghe said. “If I invested in commercial real estate or even a tech start-up, I don’t add a lot of value as an investor other than the capital I am putting in.”
Prequel expects 5 concurrent pop-ups operating in their 17,000 square foot space at launch. The concept capitalizes on creating an always new experience. The restaurant wants to attract the “hottest chef’s” in the DC – Virginia – Maryland region to fill their 400 seats.
Investors will also receive quarterly updates – along with their expected quarterly distribution.
Full concept – grand opening is scheduled for April 2015. The restaurant has acquired a sublease in the National Union Building in DC (Near Ford’s Theatre) but is waiting on landlord consent.
Interestingly, EquityEats, the restaurant investment crowdfunding platform, is said to have a backlog of 25 restaurants scrambling to get on their platform.
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