Backed by the Yards: Crowdfunding Coffee
Author: Eli Harter
It is no surprising fact that the hardest part of establishing a restaurant, cafe, or eatery is finding the right investors. To do that, you have to both convey your own skill set and ability to succeed, and show that the interest in the customer base is present. A great place to start is by raising funds directly from the community. An increasing number of cafes and coffee shops are using crowdfunding websites like Indiegogo and Kickstarter to generate publicity and secure funds independent of a formal investors. I spoke with one such coffee entrepreneur named Jesse Iñiguez who started The Back of the Yards Coffeehouse and Roastery along with his business partner, Mayra Hernandez, back in 2017.
Iñiguez and Hernandez were able to collect initial seed money through loans, private funds, and an SBIF grant from the city of Chicago to secure the location and materials for the initial coffeehouse. However, the grant became burdened by politics when the city’s alderman at the time refused to support the duo. Iñiguez and Hernandez decided to turn down the grant, and began an Indiegogo campaign as a way to pay the difference.
Indiegogo and other crowdfunding services allow anyone to start a campaign on their website with a clear monetary goal and business plan. The campaign goes over a set number of days, and so long as enough money is raised from online contributions to reach the initial goal, the campaign is a success and all the donations are collected. Jesse Iñiguez started the coffeehouse campaign with the initial goal of $10,000, but raised almost $17,000 by its completion. The huge success of the campaign gave Jesse the confidence that he and his partner had people rooting for them, and because the campaign was backed by average members of the community, its success indicated that the coffeehouse was something in which the community believed and desired. It was a “guaranteed customer base”, Jesse said. “On opening day, we already had lines out the door.”
While crowdfunding certainly has its advantages, it is not for everyone. As Jesse Iñiguez explained to me, “Crowdfunding is a full time job. You have to be committed and vigilant throughout the process.” Jesse reasons that people don’t just come to you. You have to work to develop your bases, market yourself, and set up a relationship with the community. He added that people are investing in you more than the business on these crowdfunding services. You can look to companies that will help curate your crowdfunding campaign through the addition of videos, visuals, and organizational elements that make your campaign page appealing and easy to navigate, but it's ultimately the story and mission behind your business that will really draw backers in. The more personal, vulnerable, and direct with the community you are throughout the campaign, the greater your chances are of reaching the individuals who believe in you.
Iñiguez had a few pieces of advice for anyone looking to crowd fund for their idea. The first is reward-fulfillment. It is common for crowdfunding campaigns to include small rewards like mugs or pins to thank backers, but Jesse was unprepared for just how expensive and hectic the production and shipment could be. Iñiguez and Hernandez were able to hold true to their promises, but it took a larger portion of their funds than originally calculated. Rewards are an excellent method of encouraging contributions from backers, but it’s important to understand the full cost of providing them. Iñiguez’s second piece of advice is to only start a crowdfunding campaign once you have a committed creative team. A crowdfunding campaign requires a lot of effort and imagination in order to be successful. Lastly, a few words on kickstarting a consumable. Jesse had already spent the time and money to create a quality product, but it was in farmers markets that he proved his contribution to coffee culture. Iñiguez and Hernandez’s coffee built a reputation for itself within the community, which made members more willing to contribute to the creation of the coffeehouse itself.
Ultimately, crowdfunding is a great way of proving the business model. Once they had enough money to start the coffeehouse, Iñiguez and Hernandez had proof of their credibility. Now, Iñiguez is looking for that perfect investor. “Partnerships are like dating. You have to take the time to get to know them to see if they are a good fit,” he says. Iñiguez has been approached by interested parties in the past, but it is important for him and Hernandez to stay in charge of their future direction. It can be difficult to run a whole business on your own, from production to promotion. A partner or investor is someone who not only understands where you are coming from, but will also support you along the way. For their business to grow more, Jesse recognizes the need for a partner, but he is still looking for the right one. So while crowdfunding is a good start, it is still limited in its capacity to support a restaurant or coffeehouse business. And yet, I have no doubt that it will continue to be used to support new businesses in the future.
Iñiguez went on to talk more about his and Hernandez’s contribution to artisanal coffee blends. They source their beans from Chiapas and Honduras, whose dedicated farmer families give a personal touch to every plant they grow. It is not just the local community that Iñiguez supported, but his Hispanic heritage as well. He was able to bring the authentic, bold flavors of Mesoamerica to his clientele. They are doing something special, and Jesse hopes to show not just the quality of artisanal coffee, but the role a coffeehouse can fill in a community. Their blends are not only featured in coffeehouses throughout the city, but are also sold at the Sanctuary Cafe right in Hyde Park.
Jesse Iñiguez also spoke on how important coffee was in his upbringing, and his belief in its importance in Latino culture. He spoke about neighborhoods referred to as “coffee dungeons”--places in need of a community coffeehouse that are sorely ignored. In addition to Chicago, Jesse explained that LA, New York, Houston, Dallas, and Phoenix all have substantial coffee cultures; nevertheless, coffeehouses seem to be built around Latino communities as if to avoid them. Coffeehouses can be often associated with gentrification, built to cater to an exogenous community. Yet, Jesse wanted a coffeehouse for his community-- a space that encouraged creativity, dialogue, and learning in the neighborhood.
Though it has only been open for two years, he explains that customers have come to rely on the space. “It is almost like we’ve been here forever,” he relates. High school kids use the space for studying, socializing, and awaiting sporting events. They are inspired and supported by the coffeehouse both financially and socially. Jesse shared that one of his favorite moments was when grade school students drew the coffeehouse when asked to draw something good about their community.
The Back of the Yards Coffeehouse and Roastery was built on a model where hiring and roasting is done locally to create a space the community can buy into. It is incredibly important that “we change the narrative, to show the beautiful things happening to the community and that economic growth and positive change can be instigated from within the community.” To Iñiguez and Hernandez the most important thing they’ve done is to inspire individuals to think about the neighborhood in a truly positive light. With the success they have seen in the past two years, Mayra and Jesse want to create and inspire similar locations in coffee dungeons across the country.
Jesse and Mayra have demonstrated how crowdfunding can be an invaluable tool for building a treasured community establishment Food and drink are intrinsic parts of our cultures and relationships, and building a cafe, restaurant, or coffeehouse is a great way to fuse one's own principles and upbringing with the surrounding culture and neighborhood. Everybody deserves the opportunity to actualize their vision for their community, and to connect with those who believe and trust in their vision. Crowdfunding makes this vision boundlessly more possible.