City Paper is not for tourists
The dark red stone building at 918 F St. NW has remained fairly quiet since LivingSocial stopped using it as a hub for cheesemaking, bellydancing, vodka tasting, and terrarium-building classes. But last week, the shuttered event space became home to a pop-up once again. Bluebird Bakery, from two of the city’s top pastry chefs, has taken over the first floor atrium with a spread of croissants, fruit tarts, macarons, and other baked goods displayed on wooden boards and turquoise cake stands. A coffee bar serves La Colombe, while an upstairs seating area provides a home for anyone who needs a Wi-Fi connection.
In the coming weeks, more restaurant pop-ups will open in the five-story venue, which is named Prequel. When it’s up to full speed by early summer, the place will be able to host as many as five rotating restaurants and bars at a time. Kiosks—like those in a movie theater or airport—will eventually allow guests to check in for their meals and pay in advance.
The “pop-up megaplex” comes from EquityEats, an equity crowdfunding platform where investors can potentially earn profits, not just Kickstarter-like perks. The venue was created so that restaurants that use the EquityEats’ crowdfunding platform could have a place to showcase their food and drinks to the public and potential investors. But the building also goes beyond that, offering a soon-to-open house bar called Brick & Mortar (a permanent fixture for a pre- or post-dinner drinks) and serving as a sanctuary for any chefs in need of a pop-up space regardless of their affiliation with EquityEats.
The opening of Prequel is just part of EquityEats’ reinvention since its October launch. After struggling to meet the fundraising goals for its four opening projects, the company has significantly changed its model. For starters, EquityEats will no longer raise money exclusively from accredited investors (individuals with annual incomes of at least $200,000 or net worths of at least $1 million). Instead, EquityEats plans to only support restaurants taking advantage of new regulations that the D.C. government approved late last year, which allow businesses to crowdfund money from District residents of all income levels. Through these new rules, Prequel has already raised more than $200,000 from 325 investors who gave between $100 and $10,000.
EquityEats had hoped to facilitate crowdfunding from people of all income levels from the get-go, but federal regulations made the process too cumbersome. This will likely change in the future: The Securities and Exchange Commission is currently writing regulations to implement provisions in the Jumpstart Our Business Startups (JOBS) Act that will allow anyone to be an equity investor under certain limits.
The new D.C. crowdfunding rules require approved businesses to raise funds exclusively from District residents. Steve Lucas, vice president of strategy and communications for EquityEats, sees local investors as the next step in the locavore movement. “You eat locally, you shop locally, invest locally,” he says. “Why wouldn’t a chef want local investors who provide a lot of value versus investors who live all over?” The hope is that local investors will also frequent the restaurant and bring their friends.
As it moves away from accredited investors, EquityEats has stopped raising money for its initial group of restaurants. None of the projects raised more than half of their goals (which ranged from $445,000 to $970,000) anyway, and the deadlines for those goals were repeatedly pushed back. All the money raised was pledged, so investors never actually forked over a check.
Meanwhile, two of the four restaurant concepts that launched through EquityEats are no longer happening. (Bluebird Bakery remains, and a lobster and burger concept called Lighthouse will be operated by EquityEats and pop up at Prequel.) Greg Kakaletris and chef Brittany Frick, who both worked at Estadio and Doi Moi, had planned to open a seafood counter called Albright Special. Kakaletris says in an email that because of the crowdfunding platform’s evolution—“an understandable consequence of growing a new business”—he and Frick felt the new EquityEats “wasn’t the right fit for us and the way we wanted to open, own, and operate our place.” Shortly after they parted ways with EquityEats, Kakaletris and Frick decided to put their restaurant “on hold.” They did not respond to requests to elaborate further.
Chef Adam McFarland and his business partner Amy Troutmiller have also “postponed” plans for their restaurant, a seasonal American place called Sussex Drive. “We each have some independent projects going on as well, and so we decided to hold off on this one,” Troutmiller says. She adds that being a startup that was part of another startup resulted in “some bumps in the road.” The fact that they could only accept funds from accredited investors also caused some uncertainty at first about who was qualified to be a backer. “It was hard to communicate to the investors how exactly everything was going to work,” she says.
Plans for Sussex Drive stalled before EquityEats started moving to a model that supports investments from people of all income levels. Troutmiller is optimistic about the changes: “Now that they have those things lined up, it’s going to be much easier for the future businesses that are trying to use that platform to raise money,” she says. “They’ve come a long way and made adjustments where they needed to make adjustments.”
Still, if Troutmiller ever decides to continue pursuing the restaurant, she says she would turn to traditional investors for the bulk of the fundraising. But she might consider EquityEats to raise the last 20 percent or so. The $970,000 Sussex Drive was trying to raise was “a little bit intimidating” for a crowdfunding platform, she says.
EquityEats’ Lucas doesn’t think the two discontinued restaurants necessarily reflect badly on the company. Restaurant projects fail all the time away from the public eye, and it’s better that entrepreneurs realize this isn’t what they want to do sooner rather than later. Plus, Lucas points out that EquityEats is merely the platform. “We support the entrepreneurs, but this is eventually their endeavor. The entrepreneurs are the ones who have to do the campaigning. They have to make the product,” Lucas says. “We’re not handing someone a restaurant. That’s not what this is. That’s not what crowdfunding does either.”
Going forward, EquityEats plans to work with more seasoned chefs and restaurateurs who already have lots of connections and business acumen but are looking to crowdfund their pool of investors. This will likely include people who are opening their second restaurants or expanding their brands.
EquityEats is also banking on Prequel to help attract more investors. The idea is that people will be more willing to back a place where they’ve tried the food and drinks.
While it’s yet to be seen whether the investment dollars will, in fact, roll in, at least Prequel will make it easier for anyone looking to host a pop-up. D.C. has a growing number of incubators like EatsPlace or Mess Hall that have spaces specifically built for pop-ups, but most chefs looking for temporary kitchens still rely on restaurants or other venues they can borrow during off-nights. At Prequel, they won’t have to worry about working around someone else’s schedule or finding room in the walk-in fridge. And rather than relying on friends or relatives to wait tables, Prequel will provide a staff of servers.
Bluebird Bakery chefs Tom Wellings and Camila Arango did one pop-up at After Peacock Room in Georgetown before moving into Prequel. Wellings had hoped to make croissants, but when he got there, he realized there was no walk-in fridge. It was a cold night, so he set up on the back patio to chill the dough.
Logistically, working out of Prequel is already going more smoothly. Because of the resources, Wellings believes the pop-up complex will allow them to more realistically showcase to investors what they want to offer, rather than the best they can do in a given space.
That’s important because if Prequel and EquityEats want to succeed, the pop-ups have to become destinations in their own right. “The experience here has to be an experience that is on par with any other restaurant,” says Brian Zipin, a partner in DGS Delicatessen who is now Prequel’s general manager.
Prequel’s 325 crowdfunded investors are counting on it.
Photo by Darrow Montgomery