Wine Enthusiast Magazine / Web 2011 / Winery Investing Beyond Cashing-Out

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Winery Investing Beyond Cashing-Out

Micro-lending and crowd-funding make opening a winery possible without needing a personal fortune.

Today, possessing a large fortune is no longer the only means to start your own winery.  While millions of retirement dollars or capital gains can score you the winery of your dreams in California, New York or Virginia, concepts such as crowd-funding and micro-lending could get you through the cellar door for much less.

Crushpad, a custom wine-making facility based in Sonoma, California, recently instituted its Syndicate program, which provides the business tools including private investment agreement and business and compliance models to start a wine brand.

Through crowd-funding, the leveraging of communities of investors, a small wine brand producing 50 to 2,500 cases annually can be formed using Napa Valley grapes for as little as $20,000.

“We’ve found that the more investors there are in a wine brand, the more people there are promoting the wine because they have pride of ownership,” says Michael Brill, Crushpad founder. “Our clients are very busy and even 50 cases require a lot of effort to sell. So if you’ve got 10 investors promoting it, you’re better off.”

Before the current economic downturn, Sonoma vintner Ross Halleck attempted to use micro-lending to raise money for Halleck Vineyards through Prosper, a person-to-person lending marketplace. Previously, he came up with only $1,000 from micro investors, which he turned down because “it wasn’t worth the trouble.”

Today, Prosper reports that its small business loans jumped 83% in the last six months, including loans to wine-related ventures. The recent trend is for small business owners to seek personal loans and use the capital to fund small businesses, notes Prosper spokesman Laurie Azzano.

Small investors can also buy into the wine business by acquiring shares of publicly-traded wine companies, such as Constellation Brands or Treasury Wine Estates. “You have more fluidity with a publically-traded company and it’s easier to buy and sell,” says Richard Hogan, a managing director with Merrill Lynch in San Francisco.

For those who envision the scale of Napa or Sonoma wineries, the economic downturn has created buying opportunities, though not exactly fire-sale prices. Rob McMillan, founder of Silicon Valley Bank’s wine division in St. Helena, California, says, “As we make the long, hard slog out of this recession, people are buying and selling wineries, and financing is available.”