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Cleveland Whiskey founder raises a glass to the crowdfunding process

Northeast Ohio

Tom Lix, the founder and chairman of Cleveland Whiskey LLC, is part of a Forbes roundtable that looks at how the introduction of so-called "equity crowdfunding" has worked for small businesses.

For Cleveland Whiskey, it seems, the changes that went into effect last year via Title III of the JOBS Act have gone pretty smoothly.

Asked to describe the terms of Cleveland Whiskey's Title III raise, Lix tells Forbes, "We didn't know how this would turn out. The initial target was $100,000. We then raised it to $250,000 and later to $500,000. Most importantly, we wanted to give our customers a chance to own shares in the company. We closed with 980 new investors and just about $700,000 in funding. Probably could have kept it going to $1,000,000, but it's time to activate our new investors and put what we've raised to work."

The biggest challenge with raising money this way, he says, was "the fact that it was all new. Some questions hadn't been asked or answered before. I think it will be easier for companies doing this now as opposed to being one of the first. Also, I'd suggest that the limits are simply too low and some of the future reporting requirements might be a little excessive."

Overall, though, he says the process was "relatively easy and straightforward."

As for lessons he learned from crowdfunding efforts, Lix says, "You can't do this without marketing. We were ready with an in-house database of people who had sampled our whiskey, been on a tour, and tried us at an event. We also used social media effectively. I've seen successes and failures, and the key is getting your message to potential investors. This isn't something that works without effort."

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