When Emily and Stuart Phillips were looking to start a business in their hometown of Eugene, Oregon, ice cream was a natural choice. Emily, a former chef, had grown up making ice cream with her family in North Carolina, selling it door to door in a little red wagon. Stuart, a gregarious man who describes himself as a “recovering attorney and army officer,” was all in. They bought a used Häagen-Dazs push cart and six Cuisinarts, and started making all natural, locally sourced ice cream out of their home.
Red Wagon Creamery sold its first scoop in April 2011. By 2013, the Phillipses had opened a brick and mortar shop downtown where a staff of more than a dozen scoops out flavors like Hail To The Bee, made with Pacific Northwest clover honey, and Oregon Mint Chip. The next step was to expand into the lucrative wholesale business.
While Red Wagon Creamery was taking off in Eugene, the momentum for a new state law that would enable securities crowdfunding within Oregon was building across the state. In 2014, Amy Pearl, the head of Hatch Oregon and the driving force behind the new law, was barnstorming the state to educate communities about the proposed Oregon Intrastate Offering Exemption rules—or the Community Public Offering (CPO) as it is informally known.
When Pearl and her team visited Eugene in November 2014, the Phillipses learned about the CPO and were intrigued. They needed money for expansion and thought this new tool might be a great fit. Stuart enrolled in Hatch’s 10-week InvestOR Ready Accelerator program, which prepares entrepreneurs running companies with fewer than 50 employees to raise capital using a CPO.
He drove two hours to Portland once a week for training sessions that covered everything from how to make a business plan to the legalities of what you can and can’t say in advertising. The couple prepared to launch their campaign as soon as the new rules went into effect in January, 2015.
They decided to sell the equivalent of 10% of the value of their company in equity to Oregon investors. “We wanted people to literally feel invested in us,” Phillips explains. “You can also use debt financing. But it seemed to make more sense from the standpoint of getting local people to actually have buy-in to a local business to treat them as partners, not lenders.”
Phillips is the first to acknowledge that marketing an offering requires a lot of time and energy. He and Emily raised awareness about their campaign by joining the Hatch Oregon Road Show, which introduced potential investors across the state to companies offering CPOs. The Phillips traveled to events from Bend to Corvalis.
Related: Crowdfunding, Oregon Style
Their efforts paid off. In October 2015, Red Wagon became the first company in Oregon to successfully complete an intrastate offering under the new CPO law. The company raised $120,000 in nine and a half months from 173 investments ranging in size from $100 to $2,500—the legal maximum investment per person under the Oregon law. The company attracted a diverse range of investors, from University of Oregon college students, to moms who bought shares for their kids, to couples who invested the maximum amount.
“173 investors. And for every one of those people, Red Wagon is their ice cream.”
The money will fuel Red Wagon’s expansion efforts. It has helped the company get started on a new production kitchen and to purchase equipment that speeds the process of packing ice cream into cartons. Before that they hand packed every pint.
The community capital also helped Red Wagon get through what Phillips calls the “weird grey area between being too small to care and too big to fail” where it can be hard to get funding from traditional sources. “The CPO was a godsend in helping us get over that initial hump to where now we’re selling enough and we have enough growth potential where seed funds and angel investors are interested in helping us fund the next stage.”
Like all good crowdfunding campaigns, Red Wagon’s CPO did much more than supply much-needed capital. It also increased their loyal consumer base.
“We got money, but we also got brand ambassadors,” says Phillips. “One-hundred and seventy-three investors and for every one of those people, Red Wagon is their ice cream. They go to the grocery store and they buy it, they come into the store, they tell their friends, and if we’re not in their grocery store, they ask why. They email us to say, ‘here’s a little place that would be great for you to contact.’ It’s super. It’s exactly what the whole local investing thing should be about.”
Red Wagon keeps its ambassadors in the loop through a monthly newsletter, an annual report and an annual meeting. “People come and get free ice cream and hear from us what we’re doing—the plans we have and the challenges we had last year,” says Phillips.
Red Wagon is opening a second store in Eugene at the University of Oregon’s student union. And its ice cream is being picked up by 130 Fred Meyer stores. Now that’s a sweet story.
Stuart Phillips’ tips for a successful crowdfunding campaign:
Do it Face to Face
“Most of our investments came out of a person-to-person interaction. The online platform was great for processing the investments, but not that great as an engagement tool. Getting people aware of your offering is an issue —it’s devoting the time and resources necessary to promote your CPO.”
Be Ready to Sell
“Part of the success of your CPO is how much time and energy you are able to devote to pushing it. Running a campaign is a lot of work. It’s a good tool as long as you’re prepared for that and as long as your business legitimately wants to engage with people. If you have the type of business or the type of personality where you are actually excited to go out and meet people and tell them about your product, business or service, this is a good way to do it.”
Show and Tell
“Having a physical product and letting people sample it is key. When you put a spoon in someone’s hand, then they really start caring about your ice cream. Everywhere you go, have your widget with you and be prepared to show people how great it is.”
Erin Pidot recently received her Masters of Public Policy from the Gerald R. Ford School of Public Policy at the University of Michigan. She has just wrapped a is a fellowship with Metro, a Portland, OR-based regional governing agency that focuses on regional land use and transportation planning.