From its spot inside Cupcake Royale in Ballard, Rodeo Donut is raising money under a new scheme called “regulation crowdfunding” to finance its own location.
Nicki Kerbs woke up before midnight Friday. She had no choice — National Doughnut Day was upon her, and she had to get baking.
Kerbs and her team baked 1,500 brioche doughnuts before the sun was fully up Friday – 10 times the number of pastries her small shop, Rodeo Donut, usually makes in a day.
“Every day I’m sprinting,” said Kerbs, who also serves as chief of operations at popular Seattle shop Cupcake Royale.
Rodeo Donut is currently selling its baked goods in Cupcake Royale’s Ballard location, but has plans to open its own shop soon. To raise the money to find a space and create a storefront, Kerbs is turning to the newest form of fundraising — regulation crowdfunding.
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The practice allows companies to raise money from family, friends and anyone else and give investors a small equity share in the business. Rodeo Donut is looking to raise up to $100,000 with a minimum bid of $100 per person. It plans to allocate 20 percent of ownership to investors.
The doughnut startup has listed its campaign, the first of its kind in Seattle, on Wefunder, a fundraising site. The system works much like crowdfunding site Kickstarter, except investors receive a small ownership stake in the company instead of prizes and awards.
Kerbs said the company is hoping to raise money from suppliers she works with at Cupcake Royale, as well as from friends, family and the public.
“We’re taking that to our dairy partners, to our flour partners, to all of our partners, to say, ‘Hey, we are starting this great thing. We’re going to continue to do our products and everyone wins,’” she said.
Regulation crowdfunding went into effect May 16 when the federal government allocated long-awaited rules to the 2012 federal Jumpstart Our Business Startups Act, or JOBS Act.
The provision allows people to invest in private companies and receive equity without having to hit a certain wealth threshold. Prior to the new regulation, only “accredited investors,” generally people with a net worth of more than $1 million, could invest for equity.
“Before, people could buy shares in public companies, but by the time companies get to be public sometimes a lot of the value has been wrung out the company,” said Joe Wallin, an attorney with Carney Badley Spellman, who works with startups in Seattle. “Now, non-accredited people can go online and buy shares in private companies.”
Rodeo Donut connected with San Francisco-based Wefunder when Rodeo’s first customer, an Amazon.com employee, insisted the shop needed to find a way to expand, Kerbs said.
“We had a hard time getting a traditional bank loan because we are considered a startup,” Kerbs said.
Wefunder traveled to Seattle to meet with Rodeo and featured the doughnut company in its May 16 launch.
Rodeo is hoping to set up a shop complete with doughnuts, chicken and whiskey somewhere in Seattle later this year.