A Blueprint for Crowdfunding a Bouldering Gym

Apr. 10, 2019


This article follows up on my recent article tilted Four Reasons to Crowdfund a Bouldering Gym.  Didn’t read that one?  Start there, as it lays out a business case for becoming a climbing entrepreneur. This article is intended to provide information on more concrete possible steps a future gym owner could take to finance and develop a bouldering gym. This article provides information only, and is not provided as legal advice.

1. Come up with a business plan and a budget.

First things first: you need a plan and a budget. A real plan and budget—something that is written down, mulled over, revised, and capable of demonstrating to you, your professional advisers, and (eventually) potential investors the steps you plan to take to get from Point A to Point Cash-Flowing. 

A business plan need not be overly long, but it needs to be more than just laying out your dreams for what your business will eventually be.  What are the first steps you need and plan to take, and the second, and the third?  Who is on your team, and how do their skills and experience help you meet your goals?  What is your timeline for reaching key milestones?  What expenses do you plan to incur? How much revenue will the business need to generate to keep the lights on? Turn a profit?  How will you generate that revenue?    

Write these things down. Include pictures, charts, and graphs. Show your business plan to business-savvy colleagues and friends and ask for construction criticism.  Take their feedback seriously.  Revise and repeat.

2. Conduct a rewards crowdfunding campaign to support the development of your business plan.

Once you have a business plan in place and a location in mind, you will likely need money.  One potential way to help offset early startup costs is to conduct a rewards crowdfunding campaign.  For example, you can use rewards crowdfunding dollars to hire professional advisers like lawyers, accountants, real estate brokers and other professional advisers you will need for later steps in the process.


“Rewards crowdfunding” is generally what occurs on sites like Kickstarter, GoFundMe, or Indiegogo.  These sites allow people to contribute money to a business, person, or a cause they support, despite not being promised much of value in return for that contribution.   Rewards crowdfunding is largely unregulated, so long as fraud is not involved.  That means a rewards crowdfunding campaign is relatively inexpensive and easy to put together. 


But… don’t be too quick to conduct a rewards crowdfunding campaign without a solid plan.  Conducting an ineffective rewards crowdfunding campaign may do more to harm your business than help.  This is because crowdfunding is not only about raising money.  Crowdfunding presents an opportunity to gage interest for your business in the marketplace.  If your crowdfunding campaign attracts a lot of contributions, even small ones, from people interested in seeing a climbing gym built in their community, those contributors may become your first paying clients down the road.  They also may serve as brand ambassadors willing to spread the word about your business and goals and to encourage others to support you along the way. It is important to keep these folks happy. 


If you want to conduct a rewards crowdfunding campaign successfully:


  • Don’t set your minimum crowdfunding goal too low.  You should have specific, budgeted milestones in mind and set funding goals around those milestones.  If you don’t reach enough to hit at least the first milestone, it is best to return contributors’ money to them and go back to the drawing board.  You should not be utilizing crowdfunding money as petty cash for small expenses that don’t allow you to make meaningful progress towards your goal.


  • Don’t set your minimum crowdfunding goal too high.  No matter how good your plan is, don’t count on raising every dollar you need through a rewards crowdfunding campaign.  Most successful Kickstarter campaign raise less than $10,000.  Setting your goal too high may turn off potential contributors who, though supportive, feel their small contribution is a drop in the bucket and better spent elsewhere.


  • Offer a spiff.  Though you can’t promise contributors in a rewards crowdfunding campaign equity or some other financial return in exchange for their contribution, you can promise them some other benefit of nominal value.  For example, you could offer a T-shirt, or a punch card pass to the gym, to those who contribute above a certain threshold.


  • Invest in a video.  People like to imagine how their dollars will be spent.  Putting together a video or other visual presentation is likely to help motivate people to pitch in.  Some of the most successful rewards crowdfunding campaigns attribute their success in part to a professionally-made video showing why the business founders and/or their product are compelling and exciting enough to warrant financial contributions.


3. Location, location, location.  How about an opportunity zone?

Where to locate a bouldering gym is an obvious question that will arise early in the planning process.  It so happens that, right now, there are some real incentives to develop a business like this in a designated opportunity zone.  Don’t know what that means?  Here’s a quick overview:

The Tax Cuts and Jobs Act of 2017 included a new community investment tool to encourage long-term investments in certain, pre-designated urban and rural areas nationwide designated as “opportunity zones.”  There are opportunity zones in every U.S. State.  Each Governor had the ability to designate 25% of eligible census tracts (fancy word for “neighborhoods”) in their state as opportunity zones. Generally, eligibility is determined by whether the tract meets the definition of a “low-income community.” Tracts that fail to meet this definition may not be disqualified if they share a border with a low income community. According to the Brooking Institute, 57% of all neighborhoods in America met the eligibility requirements.  Of these, over 8,700 census tracts were designated by the U.S. Department of Treasury as opportunity zones. Here is a map of every opportunity zone in the country.

Minnesota has 509 eligible, low-income tracts; of these, Governor Dayton nominated 128 census tracts, which were all approved and designated as opportunity zones. Here is a map of the current opportunity zones in Minnesota.

There are two primary reasons to consider building a gym in an opportunity zone. First, your business may become more appealing to wealthy investors looking to reduce their tax liability by reinvesting their capital gains in businesses/projects like yours. According to the Tax Foundation, an investor can receive up to three tax benefits if they reinvest capital gains in a Qualified Opportunity Fund (QOF):

    (1) A temporary tax deferral on any capital gains reinvested in a QOF within 180 days of realization. The tax     payment is deferred until the investment is sold or exchanged, or until December 31st, 2026, whichever comes     first.

    (2) A 10 percent step-up in basis for capital gains reinvested in a QOF if the investment is held for five years.     The basis is increased an additional 5 percent for any investments held for seven years. This step-up in basis     means taxpayers can exclude up to 15 percent of the value of their reinvested capital gains from their taxable     income, decreasing the investor’s tax liability when they sell or can no longer defer taxation;

    (3) A permanent tax exemption of any capital gains that accrue after investment in a QOF, if the investment is     held for at least 10 years. Opportunity zones increase the basis of any investment held in a QOF for 10 years to     100 percent of its fair market value on the date it is sold or exchanged.

Second, you help fulfill the public policy purpose behind the Tax Cuts and Jobs Act by creating opportunities in areas of your community that could use an economic boost.  Making this social mission part of your business plan (in addition to just being a good thing to do) could help you tell a compelling story to prospective customers and clients down the road.

4. Raise equity capital from a handful of high net worth investors

If you do find a gym location within an opportunity zone, find an opportunity zone fund—or build one yourself with the help of an attorney and an accountant— to seek investors. The Department of Treasury’s proposed regulations state that a Qualified Opportunity Fund (QOF) must be an entity classified as a corporation or partnership for federal income tax purposes. An LLC that chooses to be treated either as a partnership or corporation for federal tax purposes can organize as a QOF.

If you are lucky and make the right connection to the right investors, you may be able to raise a lot of the funding you need from a relatively small number of people.  This can make it easier to manage your business’s cap table down the road.  That said, sophisticated investors that put in large amounts of money may expect significant equity and voting rights in return.


5. Conduct a securities crowdfunding campaign targeting “everyday” investors

If you still need additional capital to finance the building, or otherwise get the business off the ground, consider conducting a securities crowdfunding offering targeting “everyday” consumers and climbing enthusiasts (e.g., people other than high-net worth individuals). 

Securities crowdfunding is different from rewards crowdfunding, discussed above.  Securities crowdfunding occurs when a business owner uses the Internet to entice investments by promising investors equity in the business, interest on a loan, or some other financial return in exchange for an investment.  This type of transaction is a security and, as such, is subject to complex federal and state securities regulations designed to protect consumers.

Like a rewards crowdfunding campaign conducted over a site like Kickstarter, a securities crowdfunding campaign allows you to raise money in smaller increments from a larger number of people.  There are pros and cons to this approach.  A con: It can become challenging to manage numerous investors who now have some stake in your business.  They may call with questions, expect more access to your decision-making processes than you intend them to have, etc.  A pro: On the other hand, a crowd of investors are not only financiers of your business, they are also brand ambassadors out their promoting your business to friends, family and (potentially) other investors.  As with a rewards crowdfunding campaign, a securities campaign is not always about the money.  BUT, remember that this time, you are responsible for fulfilling a promise to your investors… and, securities regulations impose various restrictions and requirements on how much money you can raise online, how you can market the offering, and what information you must disclose to prospective investors before they give you money.  Its important to work with an attorney to help you navigate these requirements.


6. Partner with a brewery

Finally, it so happens that large, open, warehousey spaces that make good bouldering gyms are also prime locations for breweries. If there happens to be a brewery near where you are planning your gym, go meet the owners.  If there happens to be a building for sale that could house a brewery, find some brewers looking to start a business. 

Breweries are notoriously successful at conducting crowdfunding campaigns.  People who like beer want to feel a part of a community of beer-lovers, and they like the idea of co-owning a neighborhood brewery. Something tells me that folks who like the idea of investing in a brewery may also like the idea of investing in a climbing gym, and vice versa.  You never know what could happen when two crowds align.

Written By:
Brian Edstrom

Brian Edstrom is a Shareholder and Attorney at Avisen Legal, P.A. He brings to Avisen clients the ability to “speak regulator,” having spent several years working for federal and state regulators in Washington D.C. and Saint Paul, MN before entering private practice.

Riley is an Avisen Fellow who is currently a first-year law student at Mitchell Hamline. He graduated in 2018 from the University of St. Thomas with a degree in Business Law. He and his four younger siblings were born and raised in Northern California. Riley enjoys boating with his friends on Lake Minnetonka and avidly follows Minnesota sports teams.

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