The Speakeasy Group has already established a successful hospitality company in Sydney and Melbourne.

Now, it’s turning to equity crowdfunding as a way of raising capital to expand its operations.

The group launched its crowdfunding operation on the Birchal platform last week. It set a minimum target of $750,000 with the option to raise up to $3 million.

Seven days into its one-month listing, the company has raised just over $700,000, or 93 per cent of its minimum target.

Take it to the crowd

Equity crowdfunding has gathered momentum in Australia since the middle of 2018, when the government passed legislation allowing private companies to use the platform.

The model provides a regulated framework for early-stage startups to tap into the power of crowds and raise capital to fund the next phase of growth.

In that sense, Speakeasy is somewhat unique in that it has already has an income-generating business model.

Founded in 2010, it now runs six venues across Sydney and Melbourne and is the name behind established nightspots such as Eau-de-Vie and Mjolner. Four venues are now well established while the other two opened within the last year.

According to the company’s investor presentation, those venues generated combined EBITDA of $2.63m in the 2018 financial year, on revenues of $14.25m.

Its latest venture is Nick & Nora’s, a cocktail bar in the western suburbs of Sydney. And to raise funds for an interstate expansion, Speakeasy has turned to the crowd.

“We launched the Sydney venue in Parramatta in October last year, and have earmarked the funds raised as part of this campaign for Nick & Nora’s Melbourne,” Speakeasy managing director Sven Almenning told Stockhead.

“We’re in the final stages of lease negotiation at the moment.”

Trust the process

Given that Speakeasy is an established business with positive earnings, thee group’s crowdfunding offer was based on an indicative valuation of $21m.

For its four established venues, the company applied an earnings multiple of five times EBITDA. And Mr Almenning said the crowdfunding option provides comparatively simple access to capital for further expansion.

“There is a lot that needs to be done ‘back of house’ so to speak to get the business up and ready for something like this,” he told Stockhead.

“But other than that we’ve found it to be a great process, and far less taxing than some of the other means of funding that are available.”

Down the track, Speakeasy’s investor presentation said further growth could leave it well positioned for a trade sale or even a public listing.

The company cited the example of the Redcape hotels group (ASX: RDC), which owns a portfolio of 32 pubs and commenced trading in November last year.

Shares in Redcape have been little-changed in the early going and the company is currently trading fractionally below its $1.08 listing price.

For now though, Mr Almenning is happy to utilise a less-traditional way of raising capital. So would he tap into the crowd again to fund another expansion?

“We’ll see how this plays out, but I definitely think so,” he said.

“Should we do well on this campaign, I think we’ll see a lot more bar and restaurant groups turning towards crowdfunding — as opposed to say, banks — for funding new ventures,”