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EquityEats, a crowdfunding platform for restaurants, kicks off in the District

EquityEats, a crowdfunding platform for bars, restaurants, bakeries and other food businesses, soft-launched this week in anticipation of its official launch on November 13. Four restaurant concepts are currently available on the site for funding; CEO Johann Moonesinghe hopes to add at least three more by the organization's official launch.

The four concepts currently being funded are Sussex Drive, a restaurant inspired by seasonal and locally sourced ingredients, Albright Special, a small seafood counter and fresh-catch market, Bluebird Bakery, a old-world style boulangerie, and Lighthouse, an American eatery serving burgers and lobster.

EquityEats is different from other crowdfunding platforms in that investors in each concept (which will always be brick-and-mortar establishments, not food trucks or pop-ups) own a piece of equity in the restaurant they invest in. Each concept is limited to 100 investors, and as of right now, those investors have to be accredited.

"Our goal was to allow both accredited and non-accredited investors [to participate]," says Moonesinghe. But until current federal legislation is finalized that would allow for true crowdfunding, EquityEats is closed to all but the rich, since "accredited" in this case means that the investor has earned at least $200,000 per year for the past two years, or $300,000 a year for two years if they count their spouse's income, or has a net worth of more than $1 million, house not included. Minimum investment amounts of $2,500 and, in some cases, $5,000, may also keep casual investors at bay.

Moonesinghe says that the reasons for crowdfunding a restaurant platform over turning to "a rich uncle or a bank for an SBA loan" are numerous. "With an SBA loan, you have to pay a 10 percent loan origination fee and you have to make a payment on that loan everyone month," he explains. "With our platform, investors only get paid back when you are profitable." That could mean a year or more.

Additionally, EquityEats "structures our investments well," Moonesinghe says. "We negotiate leases." The company also keeps an eye on their investments' financial situations, both during the campaigns and after funding is complete. "The number one reason restaurants fail is because they open undercapitalized. We make sure that doesn't happen."

Once a restaurant opens, EquityEats has three "points of contact" with the restaurant to keep an eye on its investment. "We take care of the bookkeeping, we run software on the restaurant's point-of-sale system and we maintain access to bank account statements," to make sure taxes are being paid on time, for example. Moonesinghe says that the idea is to hand a restaurant a complete package of tools to help run their business on the back-end, freeing them to focus on creating the best food experience possible. Restauranteurs will pay a small monthly bookkeeping fee for this service, but EquityEats won't make a dime on the crowdfunded concepts until all other backers are paid out in full. 

Moonesinghe and his four cofounders are testing the concept with their own restaurant called Lighthouse. "Lighthouse will be owned by EquityEats, and it will be a place for us to test everything out first [financial, payroll and software systems, etc.] before we push it out to everyone else," he says. The restaurant will serve burgers and lobster and will be "a streamlined operation, with low waste, that is based on a similar concept in London." The exact location of Lighthouse is still being finalized and should be announced in the coming weeks; Moonesinghe says they are looking "down near the Mall."

"We want to [crowdfund] thousands and thousands of restaurants," Moonesinghe says. "D.C. is proof of concept for our company." EquityEats is looking at launching in a second city—probably San Francisco, in early 2015, and would like to be in three additional locations by mid-2015.

Read more articles by Allyson Jacob.

Allyson Jacob is a writer originally hailing from Cincinnati, Ohio, and is the Innovation and Job News editor for Elevation DC. Her work has been featured in The Cincinnati Enquirer and Cincinnati CityBeat. Have a tip about a small business or start-up making waves inside the Beltway? Tell her here.
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