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“A lot of people give you advice not to do business with family, but for me, that was actually the objective,” says David Favela, CEO of Border X Brewing. The James Beard Award-nominated brewery and community hub has locations in San Diego and Los Angeles.David, a proud son to Mexican immigrants, runs the breweries and tasting rooms alongside his brother Marcelino, nephews Martin and Ivan, and wife Carmen. The family went into the brewery business as a way to come together, as their prior corporate jobs kept them from seeing each other and their extended family.
The team’s family-first, Latinx community-centered approach helped differentiate the business from other local venues and build a fiercely loyal customer base. Despite threats to the food and beverage industry in the wake of the COVID-19 pandemic, the family and team were able to achieve growth by highlighting their vibrant culture and catering to the distinctly Mexican palate of their community.
“Border X has been this beautiful, organic unfolding of something
that I never could have put in a business plan, to be honest,” David says. “I never imagined being a community center—a place for the community to come into and enjoy. These were all pleasant surprises along the way.”
But starting a family-run business from scratch wasn’t without challenges. One of the family’s early hurdles was generating enough capital to grow the business. “As a person of color, I think we don’t have access to as much capital as other groups. I know that there’s a structural wealth gap between a lot of us, and it does impede many of us from starting companies.”
David leveraged creative solutions, including fintech and innovative financing options, and he leaned on a community of enthusiastic customers to start building towards success. Using these alternatives, they were able to develop a solid financial foundation and begin to scale.
Border X Brewing’s success proves that when community-minded entrepreneurs like the Favela family are empowered to achieve their goals, the business itself becomes an agent of social change and transformation.
Building a community-first business
For David, it was important to provide a safe space where residents of the previously underserved neighborhoods of Barrio Logan in San Diego and Bell in LA could feel at home and at ease while enjoying some social time with friends and family.
The family focused on creating craft beers that incorporate Latinx culinary tradition, with familiar flavors that reflect their community’s taste and identity. Their initial intention was just to make enough beer to pay the bills, and create a venue for their community to connect and have fun. David didn’t create a formal business plan, and he hadn’t taken into account the up-front cost of purchasing equipment. He also didn't expect demand for their beer to grow beyond their production capabilities as quickly as it did.
An unexpected turn of events helped them solve these early capital challenges. The enthusiastic community that began to grow up around the brewery was more than willing to provide support and help fund their business. One of their regular customers became their first investor, providing $100,000 in seed funding. The Favelas also leveraged equity crowdfunding, allowing customers and community members to invest in the business, raising $200,000 for the brewery.
Success is in his DNA
- Investing in creating a space specifically for their underserved community to enjoy the flavors of their Mexican heritage that reflect and celebrate their culture.
- Solving a lack of access to traditional funding by reaching out to their community to raise capital for expansion through equity crowdfunding initiatives.
- Taking on investors who are excited about the product and the brewery’s impact and can offer networking opportunities and expertise, not just capital.
- Outsourcing financial management and payroll and focusing on what they know best: engaging and growing their customer base through channels like social media.
Business advice from behind the bar
Finding avenues to acquire and maximize investment funding is one of David’s greatest strengths as a business owner. “I remember looking at a capital raise a local brewery was doing here in San Diego. Their family and friends raised three or four million dollars, from only three or four people,” David recalls. “Even with my vast network, I could never approach those kinds of numbers. If you can't borrow a couple of million dollars from your dad and brother, it forces you to be more creative, more resourceful.”
One of the strategies David employs to create a mutually-beneficial partnership is to ensure investors not only bring capital into the business, but also connections, opportunities, and insights. That first investor worked at an events company and was able to organize a successful party for Sony at the brewery, packing the house and introducing the Border X brand to a whole new audience.
As the business rapidly expanded their customer base, a major expense was acquiring more brewing equipment to scale beer production. Like many first-time business owners who often don’t have the reliable cash flow or collateral to qualify for loans, it was difficult for the family to get funding from traditional banks to purchase equipment. David leveraged several lease-to-own solutions to acquire the equipment they needed to not only run the business, but to expand it. They financed their first $200,000 brew system for the Barrio Logan location and repeated the process for the brewing infrastructure in Bell.
Brewery operations also benefit from outsourcing payroll and using point-of-sale (POS) and accounting software. This ensured their paperwork and records were in order when they did need to apply for funding from traditional institutions during the pandemic. David saw firsthand that many Latinx and POC business owners in his community didn’t have access to these resources and had a hard time applying for assistance.
When banks and government support were backlogged over the past year and a half, the team quickly looked for alternative forms of lending that allowed them faster access to capital.
Inspiring resilience & transformation
Just before the pandemic, the business was turning out their highest sales ever. Despite the closures and complications COVID-19 brought to the food and beverage industry, they continued to approach these new challenges with adaptability and resourcefulness.
“After a week of lockdown, my wife said, ‘You know what, I’m done sitting around, we're gonna do deliveries and pickups.’”
David and Carmen began bringing care packages to their customers’ doorstep filled with beer and merchandise, and offering beverages and food to go at their locations. The team also successfully revamped their social media strategy, using Instagram to share updates, raise awareness, and attract new customers—particularly in Bell.
Persevering through their business challenges, the brewery inspired a renaissance in their surrounding neighborhood, empowering others in the community to start their own small businesses and serve their network of family and friends.
David is committed to placing his breweries in communities that have been underserved and provide amenities like restaurants and art spaces that promote culture and connection. It’s important to him to resist gentrification: “We’re serving the community that exists today. We're not waiting for a new community to displace them. As a person of color, I'm extremely proud to be playing this role.”
More than just a cool spot to grab a pint, Border X Brewing celebrates and supports a network of friends and family who love the brewery, amplifying the rich community spirit of the neighborhoods that the Favelas and their team continue to serve.
To learn more about Border X Brewing, visit borderxbrewing.com. Visit Fundbox to learn more about how a line of credit can help your small business.