New Restaurants Turn To Potential Patrons To Open Their Doors

When the Tribeca restaurant The Elevens opens its doors this fall, it won’t be all thanks to an angel investor like Bobby De Niro, a partner in nearby Nobu, or a deep-pocketed industry player like Jeffrey Chodorow. First–time restaurateur Scott Kester raised a significant chunk of the $1 million capital needed to open the 65-seat restaurant and bar by offering neighbors the chance to become permanent “seatholders,” a position which entitles them to priority reservations and lifelong discounts. The cost? $500. “We thought it would be a good idea to build a community at the same time as raising capital,” explains Kester, who attracted 150 seatholders and hopes to enlist a few hundred more before the opening.

The Elevens is just the latest example of a restaurant turning to its (future) regulars to open its doors. As banks reduce access to large-scale loans and traditional restaurant investors take fewer risks, restaurateurs are looking to their communities and to a growing swath of micro- financing sites to raise money. They do it through Kickstarter, using the crowd-funding site to raise money in exchange for promised gifts and rewards. And they do it through Kickstarter emulators like Credibles, a site founded early this year that allows supporters to pre-pay for meals and services; Small Knot, which facilitates small loans from supporters in exchange for perks like private party invites or cooking lessons; and Lucky Ant, which solicits funds from neighbors living in the same communities as the businesses. “I can’t imagine spending money on a coffee shop in Portland, Oregon or Dallas, Texas,” says Lucky Ant founder and Lower East Side resident Jonathan Moyal, “but I’d be happy to fund one here.”

While Kester promised his neighbors seats at the table, that’s small fries compared to what Eric Fenster, the owner of Berkeley, California restaurant Gather, promised before it opened in 2010. Fenster and his partners raised the $2 million to open their eco-friendly restaurant (located inside a “green” community center) by recruiting 62 friends and neighbors as investors. Each committed a minimum of $5,000 [Berkeley!]. Though the return on investment for the restaurant industry is notoriously dicey, the cost of entry made it easier for first–time investors to get involved, and it offered the restaurant a built-in customer base. To raise an extra $20,000 in working capital right before the opening, the owners sold discounted pre-sale gift certificates. All the fundraising paid off. Soon after it opened in 2010, the restaurant won Esquire’s Best New Restaurant award.

Many chefs and budding investors find restaurants the perfect place to align their capital with their values. Anthony Myint, whose award–winning San Francisco restaurants Mission Chinese Food and Commonwealth both have formal partnerships with charities, included charitable donations as one of the perks during his successful $12,000 Kickstarter campaign for Commonwealth. He eventually raised about half the capital needed for the restaurant through the public sphere. Meanwhile, George Weld, the owner of Brooklyn breakfast favorite Egg, turned to Slow Money, a loosely organized group of investors focused on building sustainably minded businesses, when he started to raise money for his new restaurant Parish Hall. “Slow Money is more interested in making sure that we have a solid mission statement and actually do what we said we would do in terms of using local foods,” Weld explains. “It felt like a collaboration instead of trying to screw each other over.”