Dive Brief:
-
PieShell, a New York-based crowdfunding platform for food and beverage startups, is closing down at the end of the month due to insufficient funding, according to a LinkedIn post from founder and CEO Cheryl Clements.
-
Clements founded the platform in 2015 in the belief food and beverage startups need more than traditional crowdfunding campaigns. Since then, PieShell has helped 30 projects raise nearly $500,000, NOSH reported. However, Clements told NOSH she hadn't been able to find a lead investor to take the site into the next $1-million financing round.
-
Unless such an investor appears in the next few days, PieShell will shut down at the end of March, Clements said. She informed the company's 240 investors two weeks ago and posted a letter about the situation on LinkedIn this past weekend.
Dive Insight:
Clements told NOSH one of the mistakes she made with the crowdfunding platform was to focus on raising capital and on outbound marketing rather than launching incremental services.
"I didn’t even listen to my [gut] that it’s better to get revenue then equity," she told the website.
Raising money before expanding was another issue, Clements told NOSH. Her investors wanted to see more growth faster instead of at a slow, deliberate pace. But without incremental revenue, investment was necessary, she pointed out. The company took a 6% fee. It directed 1% of that to a nonprofit group called Emma's Torch, which provides mentoring and culinary training to needy refugees.
However, it's one thing to raise $500,000 and another to push the goal to $1 million. Since most of the amounts startups had accrued through PieShell were relatively small, it seems like a relatively heavy lift to get to seven figures — even if the food and beverage startups involved have solid ideas and work hard to bring them to fruition.
Most recently, PieShell was trying to help two startups. One was New York-based Steiner's Coffee Cake, which needed $5,000 to automate packaging for its gluten-free products and had raised $9,813 with two more days to go. They were also working with Pilotworks, a Brooklyn-based shared kitchen space used by 175 or more independent food entrepreneurs, which abruptly closed last fall and needs funds to pay rent and cover lost inventory and distribution costs.
According to PieShell, Pilotworks hauled in nearly $180,000, or 359% of what it was looking for, with two days left to go. That success likely was due to Clements' last-ditch effort on Pilotworks' behalf earlier this week. Her post about PieShell's problems, including an appeal about Pilotworks, went viral, and Wilson Tsai, one of her investors, cross-posted about the situation.
PieShell's impending closure doesn't bode well for small brands looking for help from crowdfunding platforms or similar funding mechanisms. However, Clements told NOSH her company at its core wasn't a funding platform, but a "discovery platform where people are pre-buying." That concept could prove useful for future investment initiatives in the food and beverage space, particularly for those startups unable to access the increasing number of incubators or accelerators sponsored by — or with the participation of — major food companies.
In its own blog, PieShell billed itself as "a vetting and marketing component of the new food ecosystem." It took an incubation approach to helping startups, helping both with funding and helping get ideas ready for the market. According to PieShell's website, Clements started the platform after noticing that 75% of food and beverage projects on traditional crowdfunding sites failed. The platform worked closely with the startups to help them stand out in the crowded field of food and beverage startups.
In a speech she gave at NOSHLive 2018 in New York City, Clements said that crowdfunding is not really about funding, but about "proof of concept" to get an idea in front of tens of thousands of people and marketing and building a community. "The crowd is much more important than the actual funding," she said.
Getting the crowd around startups is still a daunting task, and it remains to seen if anyone will step up and fill the void PieShell is leaving behind. Although it seems every major manufacturer has an incubator or venture capital program nowadays, the need for that kind of funding and mentoring boost is much deeper than they can meet.
Unfortunately, it seems that many of these kinds of crowdfunding platforms with food and beverage in mind have gone dark, leaving only websites behind. FoodStart, which raised money for restaurants, hasn't posted an update since 2014. Credibles, an app that allowed consumers to crowdfund local businesses through prepayment, doesn't appear to have updated its site since 2016, though there are still funding opportunities on the site and a few posts this year on its Twitter account. And the Food Angel Group, which is a New York-area mentoring and networking group — which includes investors, but is not necessarily a platform for investing — appears to be active.
The litany of crowdfunding platforms that are no longer operational underscores the challenges of working in this space for food and beverage. It may make more sense for startups to seek funding, mentorship and business advice in different places. Clements wrote on LinkedIn that there may be three "Hail Mary" opportunities to help keep PieShell alive. In the meantime, maybe this will be the impetus for like-minded people — and investors — to come together and build an unshakeable platform for food and beverage crowdfunding.