Starting a Brewery, Part 3: Money, Real Estate, and Freaking Out
I had intended to write updates about our journey with Halo Brewery every few weeks or so but, as you can probably tell, that hasn’t quite worked out.
The past 3+ months since the last post have proven to be an insane emotional rollercoaster ride. Since we started this process, we’ve had to very quickly become near-experts in corporate structure, corporate accounting and legal requirements, professional brewery design, loans and private investment, real estate, provincial liquor laws, municipal bylaws, etc.
The three biggest hurdles we continue to face are financing, real estate in Toronto, and municipal bylaws/zoning. They are all somewhat tied together.
Money, money, money…
The reality is that we are not independently wealthy, and don’t have all the funds we need to open a capital-intensive business like a brewery. We also don’t own homes that we can re-mortgage or put up as collateral for a large loan, as so many people who have taken this path have done.
So where does that leave us as a startup? In addition to putting in our life savings, we’re fortunate that the Canadian government has a small business loan program that helps businesses like ours invest in equipment and leasehold improvements, but that’s not enough on its own.
We decided fairly early on that we would need to raise money by selling shares in our business to outside investors. Much of the last six months has been spent reaching out to people, taking meetings, endlessly polishing our business plan and pitch deck, and taking more meetings… We’ve learned a lot in the process.
The first thing we’ve learned is that there are a lot of assholes out there. I mean, the type of Wolf of Wall Street assholes you see in movies — people looking for a quick deal at our expense, rich men who openly size up their wealth with other wealthy men as though they were grunting apes wielding larger sticks, men who publicly commit infidelities on their wives and brag about it, and so on. Honestly, I knew these people existed, but I had never been exposed to it before and didn’t imagine we’d have to deal with them in the process of trying to open a brewery.
There is a whole class of people in this country who add little to no value to the world, pay no taxes (that’s a whole other story), and simply sit back and watch as their money lets them skim the fat off the top. Trying to raise money throws you in the ring with the lions, and it has been a very uncomfortable thing for people like Callum and I.
More than once, we’ve had a conversation where we concluded that we would rather not start a business at all if it meant taking money from people like that. It’s important that we stay true to who we are and what we believe in, and I’m proud to say we’ve done that.
The investment culture in Canada also seems to be extremely conservative, with people preferring to invest in “safe” real estate deals rather than businesses. This doesn’t seem like a particularly positive trend for our economy, but that’s another story.
This is not to say everyone we’ve met has been bad. We’ve had some great meetings with friendly people who truly believe in us and want to help in any way they can by working toward a fair deal for everyone. There aren’t enough of them. In recent days, we have managed to overcome the loss of a major potential investor by putting together a group of amazing family and friends who are helping us out financially. We couldn’t ask for a better situation than to have people we love, who truly care about us, be a part of this with us. It finally looks like we have all the money we need to move forward with our vision.
Location, location, location…
If you read part 2, you’ll recall that, because Ontario’s liquor laws are still a complete mess, we think a smaller brewery with a taproom & bottle shop is the most successful startup model in Ontario right now.
This also means that location is extremely important, and we’ve been looking for something suitable for the past 7 months. While there are plenty of places in the GTA or Ontario where we could open a brewery, we’ve always wanted Halo Brewery to be a community gathering place in Toronto. This limits our search area to what might be one of the toughest real estate markets in the country right now.
We know that we also need concrete floors to support the brewing equipment weight (and liquid!), but most of the buildings that are well located in Toronto are wood construction with basements.
To make matters more challenging, in the City of Toronto there are some serious zoning problems for breweries. Even if you luck out and find a great location and a great landlord (good luck!), the zoning may require you to go through a costly and time consuming Committee of Adjustment process that isn’t necessarily guaranteed to give you the outcome you want. I won’t go into too many details about the nitty gritty of zoning in this city, but suffice to say we’ve had to become experts in it and allow for flexibility in our business plan to adjust depending on the building we find.
We’ve also spent a lot of time at City Hall meeting with local Councillors and staff to discuss these issues, and were invited to participate in Councillor Mike Layton’s “cask force” working group to try and improve the situation for breweries in the city.
So far, we have gotten to the point of serious consideration and negotiations on four properties that ultimately fell through for various reasons. We’re in negotiations on a fifth property right now and are crossing our fingers that it works out.
Feelings, feelings, feelings…
Have you ever heard of the fight-or-flight response? “The fight-or-flight response is a physiological reaction that occurs in response to a perceived harmful event, attack, or threat to survival. [The] theory states that animals react to threats with a general discharge of the sympathetic nervous system, priming the animal for fighting or fleeing.”
I’ve been feeling that a lot lately. Some days it feels like we’ve been working our asses off trying to make this come to life and some insurmountable obstacle is put in our way, or someone pulls the rug from under us at a completely unexpected moment in time.
More than once, I’ve said to myself: “That’s it! We’re done.” And yet somehow that fight-or-flight kicked in hard on the fight side and we found a way around it. In the past 4 days alone, we went from losing a great property and investor, which essentially put us back to square one, to finding a new property, reworking our business plan and financial model, and securing new investment. Oh, and we’ve also found time for brewing. I’ve probably aged ten years in the process.
I knew this would be hard but honestly it was impossible to predict what we were really in for. When I first started down this path with Callum I joked with my friend Sean Howard that I was really enjoying unemployment, to which he responded: “No, you are now fully employed for the first time.” He couldn’t have been more right.
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