DURHAM, N.C. (AP) — The owners of a mobile coffee business are looking to raise money through a website that relies on donations from individuals so they can open a shop in what's evolved as a hot spot in the downtown area for independent businesses.
The husband-and-wife duo Leon Grodski de Barrera and Areli Barrera de Grodski are the founders of bikeCOFFEE, a business that launched in September peddling coffee from a bicycle on weekends and at events downtown.
The mobile business owners are now looking to raise $20,000 through the website Kickstarter to help pay for costs associated with opening a permanent coffee shop, called Cocoa Cinnamon, at 420 W. Geer St. in Durham.
In the shop, the two entrepreneurs want to be able to sell coffees, chocolates as well as drinking chocolates, which Areli described as a "melted chocolate bar in a cup." They've seen other downtown eateries and projects in Durham raise funding successfully using Kickstarter, an online funding tool for creative projects by artists, filmmakers, musicians, designers, writers or others.
It's not equity investing, or loans - the project founders retain all ownership. In exchange for the donations, people receive pre-arranged rewards. In the case of Cocoa Cinnamon, the two entrepreneurs are offering rewards including free drinks, or private tastings for donors who give certain amounts. The donations will only be released if they hit their total funding target.
"I think Kickstarter is really successful here because people really care about their community," Areli said.
According to Ted Zoller, director of the Center for Entrepreneurial Studies at the University of North Carolina at Chapel Hill Kenan-Flagler Business School, that method of fundraising is called "crowd funding. It involves individuals with specific interests making small investments as a crowd to implement projects that may, or may not, have a strong business proposition," he said.
Crowd funding is an alternative for entrepreneurs trying to launch an idea to using credit card debt or from friends or family, Zoller said. Many young entrepreneurs don't have the assets to pledge as collateral to banks or others to secure loans, he said, and crowd funding gives them a broader pool of potential investors.
Zoller said he believes crowd funding is more geared for projects that wouldn't have cash flow early on, rather than for businesses that could use the sales they make following their launch to pay off credit or any debt. But he said that overall, he's enthusiastic about the "democratization of entrepreneurship."
"I think this is a future mega-trend, and is another piece of evidence of the kind of network-driven organization of our society that's emerging," he said.
John M. Torrens, an assistant professor of entrepreneurial practice at the Syracuse University Whitman School of Management, said crowd funding donations are a good way for a business owner to raise money with "no strings attached."
"The risk of parting with their money is only to have the company fail, but I don't think we are talking about huge sums," he said. "Most companies are raising money in small increments of up to a few hundred dollars."
Bob Chapman, co-owner of Traditional Neighborhood Development and the owner of the property where Cocoa Cinnamon is slated to open later this year, said there was a time when he might have been skeptical about an entrepreneur whose business plan that involved a "community of supporters helps start new businesses or projects by giving them the money to do it."
But Chapman said he saw the founders of DaisyCakes, a business that sold treats and other items from an Airstream trailer, raise money through Kickstarter and other means to open a permanent shop downtown.
The response that Cocoa Cinnamon has had to their Kickstarter campaign so far has been "amazing," he added. As of Monday afternoon, they'd raised more than $11,700, with 21 days to go.
"As far as their business model goes, all I know is that the coffee they make is fantastic and their chocolate is even better - and that they are passionate about what they do," Chapman said of Cocoa Cinnamon.
The entrepreneurs have signed a letter of intent to lease the Geer Street space, said Rob Chapman, who also works Traditional Neighborhood Development, and is Bob Chapman's son. They're slated to take over the space in May, he said, and are hoping to complete the building renovations in order to open in June.
The area where they're looking to open has seen the launch of several independent businesses, and new life given to under-utilized buildings. The space that they've signed a letter of intent for is a former gas station and auto repair shop.
The building is currently occupied by a fitness business owned by Marybeth Chiti, a licensed Gyrontonic and Gyrokinesis trainer. Chiti said she worked chipping paint, and doing other work to help restore the building.
"It wasn't a very hot spot in 2007, when I was standing on a ladder with a (scraping tool) in my hand," Chiti said of the area of Durham that now includes businesses such as the walk-up eatery King's Sandwich Shop, the Geer Street Garden restaurant and bar, and the Fullsteam brewery nearby on Rigsbee Avenue.
Chiti said the building she's in now was a previously boarded up space with some broken windows before it was restored. She said she wanted to see the space on West Geer Street preserved, and was looking for a new home for her business. She previously had a studio in a fitness club whose facility sold. She said she wanted affordable space near Durham Athletic Park.
Chiti said she lost revenue in the transition of the studio's location, and then in the recession. She said she's seen business start to come back, and now there's another tenant slated to move into the space. She's not sure where, or if, she'll continue.
"I feel that what is happening here is the stage of gentrification that you would see anywhere," she added. "The first ones are the pioneers, and they do the work, and then something happens, and the money comes in."
Rob Chapman said that because of the small size of the former gas station space, Traditional Neighborhood Development officials see it as suited for a coffee shop. They also want to see the neighborhood have "more community access."
"Cocoa Cinnamon, they came in, they blew us away with their initial presentation, and poured us the best coffee myself and my father had ever had," he said.
Information from: The Herald-Sun, http://www.herald-sun.com