I Just Made a Bad $10,000 Investment. On Purpose.

Our post-recital ice cream social was in full swing. The kids were running rampant, the leftover ice cream was slowly melting in the tubs, and the adults were enjoying some adult beverages and some non-violin music. If there’s one thing I’ve learned from children’s music recitals, it’s that the violin must be a really difficult instrument to learn to play well. Fortunately, our boys play piano.

I was chatting with another proud father, learning a little more about his line of work. He works for the local small business development corporation, funded by the federal Small Business Administration (SBA). He helps entrepreneurs start and grow small businesses. Pretty cool if you ask me.

The Investment Opportunity

Knowing that I am an avid homebrewer with a small stake in a craft brewery, he mentioned that he was working with a young man with microbrewery aspirations of his own. He had a location just off the freeway between a large city and a popular recreation area, a bargain-priced building lined up, and a solid business plan. With an SBA loan, and another $20,000, he could get this business going and the beer flowing.


homebrew boil

golden goodness


After talking it over with my wife, I agreed to meet up with my friend and the young man with a plan. I was impressed with his enthusiasm and strategy, and I figured his chances of success were pretty good. On the other hand, the craft brewing market is getting saturated. But he’s not looking to be the next Sierra Nevada; he wants to serve the local and surrounding communities, and the weekend commuters who might stop off for a growler fill on their way up north. Without any nearby competition, I think he’s in a good spot.

Unfortunately, the terms of the investment were not what I would consider favorable for the investor. Rather than partial ownership or shares in the brewery, he was looking for a loan to bridge the gap between a bank loan and his own funds. The loan would be paid back incrementally after a 2-year grace period if and when the operation is deemed by the owner to be profitable.

After the principal is eventually returned, a 20% bonus payment would be paid. If all goes well, I would end up seeing a return of 3% to 5%, depending on the time frame of repayment. A guaranteed return at that rate would be reasonable, but this is far from a sure thing.

The loan is similar in many ways to the crowdfunded real estate deals I’ve been reading about, but the returns on those invesments are at least double, and the risk is probably lower. I walked away from my meeting with the would-be brewer thinking it was a no-go for me.

Looking at the Investment in a Different Light

Later that evening, my SBA friend came by to enjoy an impromptu campfire we hosted, complete with marshmallows, homebrewed kombucha, and pale ale. We talked some more about the investment “opportunity” and he understood my position that it was, at face value, not the greatest proposition. Then he told me something very interesting.

We don’t tithe,” he said, “but I’ve made investments like this as a way of giving back.” Some of them have worked out for him, and some of them haven’t. He sees making a risky investment to help someone realize a dream as a way to use money to do some good. The concept doesn’t hold water if the startup company doesn’t somehow plan to make our world a better place.

Does a microbrewery / taproom make our world a better place? That’s certainly debatable, but compared to other drinking establishments, tap rooms tend to be more family-friendly places where people gather and socialize over a beer or two. This particular brewery will also be part of an attempt to revitalize a neglected old downtown.



beers with friends


I don’t think a brewery would qualify for any of Mr. Firestation’s charitable one more year fund, and I wouldn’t allow a brewery loan to replace any of my own charitable giving, but I understand what my SBA friend was saying. My “No” answer was now a “Maybe.” I guess he’s pretty good at his job.

I decided that $20,000 was too rich for my blood, but I could maybe part with $10,000 if the investment could produce something more tangible than a subpar return for my money. Other investors had a more intimate interest; they were family members and community members, but I live 90 miles away and barely know the guy.

When Life Hands You an Investment Lemon…

A lightbulb popped into place, hovering right above my head. What about beer dividends? My ownership stake in the other brewery entitles to me to a couple free beers in the tap room. Unfortunately, I now live over 500 miles away, so free beer doesn’t happen as often as I’d like. I completed my brainstorm, which has now been incorporated into our mutually agreed upon investor agreement as “Section 5.4 Beer Allowance.”




When life hands you lemons, make lemonade. Or make beer. My once not-so-great investment now includes a keg of beer for life, or at least the life of the brewery. I’ll even have my very own tap handle to install on my keezer, and I’ll probably take my 15.5 gallons annually in three 5-gallon Cornelius kegs, which is how I serve my homebrew, and a half-gallon growler if I want to squeeze out every last drop I’ve got coming to me.

Thinking outside the box scored me a fun perk that would not have been offered or considered otherwise. The perk also gives me a reason to go a little out of my way to visit the brewery to see how my dollars are being spent. I’ll be more involved on a personal level than I would be if I invested in a multi-unit housing in Coral Gables, Florida, even if the latter offers a better return.

Last year, I did something similar when I bartered our sectional sofa to a restaurateur in exchange for a $500 gift certificate to his restaurant. I couldn’t have asked for nearly as much in cash, but he liked the idea of the trade at that price. My family and I enjoyed a quality dinner at his joint the other night, and the bartered sofa will continue to provide good meals and more for months or perhaps years to come. Did I mention that his restaurant has 16 craft beers on draft?

In a show of serendipity, the S&P 500 has dropped 1.6% in the four trading days since my check to the fledgling brewery was cashed. In other words, I’m already $160 ahead of where I would be if I had bought some VFIAX instead. Cheers!


  • Anonymous

    Interesting. One of the reasons why I want to be financially independent is to do things like. Sometimes it takes so little (to the financially able) to change someone’s life either by helping them achieve their dream of owning a business, paying tuition,paying medicals bills or allowing them to take the needed break they need from work so they can be with their family. That feeling of being able to help knowing that even if things don’t work out you won’t be too adversely affected is priceless.

  • The Green Swan

    Definitely an investment you can feel good about. Hopefully it does well for you and you can enjoy that free annual keg for a long time!

    • It is way more fun that investing in five-letter mutual funds or three-letter ETFs. The returns aren’t great, but how many investments promise a lifetime of dividends after your principal and interest have been returned?

  • This is definitely more of a social investment. You’re investing for that community and this young entrepreneur. Nothing wrong with that since you’re already FI!

  • Wow, that is a pretty cool social investment. I’m probably too conservative to put down $10k on a fledgling brewery. I’m pretty sure Mrs. RB40 would raise her objection. You forgot to mention the most important thing – how is the beer? 🙂

    • Thanks, Joe. I’ll be sure to let you know about the beer in a follow-up when the beer is flowing. Right now, the brewery is a defunct restaurant with a purchase agreement. The brewmaster-to-be has some formal training and homebrewing experience, so I’m hopeful.

  • we all have our own poison, your beer, my 2nd home… not the best investment by any means… numerically, logically, but we work hard and put our money to work for us, for the reasons that we Can make bad investment once in awhile 🙂

  • This is such a cool story and one of the kinds of things I hope to do as well (but maybe not quite to this degree!) One thing we have done that is somewhat similar is helping our tenants. We do own a small multi-unit place and when we find good tenants we rarely (OK – never) raise the rent. We feel that we are giving back to them and then they (mostly) help take care of our property. We know we could make more money – but we try to put people first (a kind of “social” investment too). Can’t wait to hear about this venture!

    • Thank you, Vicki. We did the same when we rented out our condo after residency. We had two long-term renters (three to four years each). I’m sure we could have raised the rent, but we were happy to have good tenants; a stable rent was their reward.

  • Wow, that’s a great ‘bad’ investment. Far better than some of the ‘bad’ investments I’ve made!

    Congrats on an interesting investment. Personally I would have gone for an equity conversion option instead of the beer, but the beer dividends is a better story! 🙂

    • I like the way you think, Mr. Tako. I do have a 4% ownership stake in a brewery a couple states over.

      Laws vary greatly by state, but I believe I am only allowed to have ownership in one brewery in my current home state. By loaning money to start this one, I retain the ability to invest as an owner in another. #silverlining

  • I’m so impressed by people thinking outside of the box. You’ve found a way to make your money work for you, with the benefit of free beer, and you’re helping a young entrepreneur. Great job – it sounds like this isn’t a “bad” investment at all 🙂

    • Thank you, Harmony. One of my favorite Dad-isms is “If you don’t ask, you don’t get.” There was nothing in our initial meeting that suggested a beer allowance. But I asked. And I got. Thanks, Dad!

  • I almost invested in a local microbrewery in my neck of the woods. Like yours, it is in a part of town that had been run down for years. While I was thrilled with what they were doing I decided to pass because they wanted a minimum of $25,000. I also admit that it slightly* irked me that they offered no “benefits” whatsoever. No free pint every month, not even a t-shirt. Zero.

    So I’m curious, did you get to sample anything before making the investment?

    Bonus question: From looking at the beer pictures on your site, we seem to be beer soulmates (shout out to strong IPAs). What are some of your favorites?

    *Similar to your deal, almost every brewery investment I’ve ever seen (and there are a lot here in Colorado) offers some kind of beer perk.

    • How is the no-perk-giving brewery doing now?

      I didn’t get to sample any of this brewery’s future offerings, so I’m going on blind faith here.

      Favorite IPA / DIPAs? So many to choose from, and so many coming out all the time. I’ve had great stuff from Bells, Cigar City, Firestone Walker, Surly, Shorts, Stone, Three Floyds… Some great breweries in Colorado, of course. I sampled and toured a bunch of them in FoCo last fall.

      I do have another brewery investment that I made five years ago that seems to be working out well. I get a couple free pours anytime I stop in, which is unfortunately only about a dozen times a year. And I always drop $5 in the tip jar, so it’s not exactly free, but it’s fun to be a part of it. I’ll have to write a post about it sometime. I hear we’ll be receiving our first actual money dividend this summer. That might be a good time to revisit the investment.

      • The no-perk-giving brewery is doing extremely well. It’s a Lager only place which isn’t my style, so I can’t really rate their product. However, one of their founders is a marketing genius. I see them all over the county and they are already canning less than a year after opening. I have a friend in the industry who told me that they are still in the honeymoon period though, so I’ll wait and see.

        Those beers are all fine choices. Three Floyds Zombie Dust is fantastic. I’m also thrilled to see Stone’s Enjoy By much more frequently these days.

        Next time you make it down to Denver, try Juicy Banger by Station 26. Most of the front range beers I’ve had are pretty good, but this one is great.

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