Crowdfunding generally involves funding a project by raising small amounts of money from a large number of people. Arising from the development of the internet, the practice has spilled over into the world of wine over the last few years. The question is, what can we expect of it?
Some general-interest crowdfunding websites such as Indiegogo, Kickstarter, KissKissBankBank and Ulule offer a limited number of wine-related projects whilst others are now entirely geared to wine; these include Winefunding, Terra Hominis, Fundovino in France, Naked Wines in the United Kingdom and Cruzu in the United States. Similarly, some large projects such as Rhonéa Vignobles create their own website to recruit investors. With a total of nearly 300 million euros raised through crowdfunding in France in 2015, the money involved has certainly sharpened peoples’ appetites. These players usually act as intermediaries between wine growers – or other wine entrepreneurs – and private individuals with capital to invest. In some cases such as Winefunding and Terra Hominis, experts including star sommeliers and winemakers are brought in to select the best quality projects, whilst others simply bring would-be partners together. However, the experts receive payment from the people who put forward the investment project, whereas they would make better co-investors. Also, very few websites clearly state the fees incurred for their services – KissKissBankBank charges 8% for instance.
The type of offer is extremely varied, starting with a straightforward request for donations, usually for a noble cause such as a winegrower who wants to switch over to biodynamic farming or who has lost his/her crop to adverse weather. The most commonly-found projects are offers of investment in exchange for benefits in kind, including bottle allocations, discounts on future wines and accommodation on the estate. They can also include the chance to buy shares in an estate overseen by a solicitor, whereby a real estate or agricultural interest company is established for each estate and a wine grower leasing the land runs the property. This is still referred to as crowdfunding because the estate can be divided into hundreds or even thousands of shares. Even though the notarial formalities involve tiny amounts of money, they do reassure people; in some cases, they may come with income or wealth tax breaks. A recent study* showed that the largest sums of money come from pure investors with few connections to the world of wine and whose main motivation is financial. Some requests for funding are one-offs or occasional, ranging from €15 to €10,000, whilst others require monthly payments, as is the case with Naked Wines.
The issues at stake
Unless one is very familiar with the nature of the investment, it is essential to remember the risk and ‘liquidity’ element involved. As with stocks and shares, only invest money you don’t really need! Wine, however, has an added dimension. Some wine growers have long used ‘en primeur’ as a means of funding but the system is tending to lose steam and, unlike crowdfunding, it offers only tenuous links to the land itself. In this age of rampant urban sprawl and marketing of industrial wines designed for supermarket shelves, owning a few vines and possibly being able to harvest one’s own crop amongst friends seems like a highly appealing proposition. There is undeniable pride to be found in owning bottles of one’s OWN wine which may not be the greatest but will always be good. And if, on top of this, that tiny plot of land grows in value, it can only be an added bonus – but not the fundamental issue at stake.
*O. Bargain et al., Crowdfunding in wine, April 2016