The passage of MNvest legislation will boost startups in Minnesota, grant all entrepreneurs access to previously unattainable capital, and allow everyday Minnesotans to invest and support local businesses.
MNvest is a Minnesota law permitting equity, or investment, crowdfunding for the masses. “As opposed to a Kickstarter or Indiegogo approach, where you’re getting some kind of reward or a product for your participation, you’re actually buying a share in the entity you’re supporting,” explains Scott Cole, volunteer Board Member at MNvest.org, a 501(c)(4) organization supporting and promoting investment crowdfunding in Minnesota.
We’re all entrepreneurs here. Raising capital and finding investment streams is difficult, but vital, for survival. Gaining access to accredited investors through a traditional Initial Public Offering (IPO) is expensive and complicated, often beyond the reach of startups, which severely limits access to capital. MNvest looks to simplify the fundraising process for entrepreneurs and increase the velocity of investments through equity crowdfunding.
The MNvest legislation will unleash a realm of investment opportunities to the Minnesotan entrepreneur and small business owner, offering additional flexibility for capital financing in the startup and traditional business sectors. In the life science space, the MNvest platform could be used to complete some upfront project or create a minimal viable product. MNvest is perfect for small businesses that don’t necessarily have a tangible product or gift to give to supporters, which is vital for donation-based crowdfunding campaigns. Companies using the MNvest platform might be your traditional businesses like hardware stores, coffee shops, or breweries that offer more of a service than a concrete product and benefit from having a built in local constituency, providing additional capital options for startups and small businesses beyond the traditional channels.
MNvest legislation provides all Minnesotans an opportunity to invest in local businesses and entrepreneurs and put their money right into the hands those who need it most, without having to be a qualified accredited investor.
Equity crowdfunding was legalized in the United States with the passage of the Jumpstart Our Business Startups (JOBS) Act in 2012. However, without new rules to accommodate non-accredited investors, this legislation only benefited provided accredited investors, the wealthiest three percent of Americans, with investment opportunities. Congress charged the Securities and Exchange Commission with creating new rulesa platform where non-accredited investors- more of the everyday person- could participate in equity crowdfunding. However, to date no regulations have been finalized . The passage of MNvest will provide a much more attractive mechanism to make investments accessible to a wider range of Minnesotans.
“This allows you and I and any average person who doesn’t have a bunch of money to make that equity investment,” explains Scott. It provides the opportunity for the average Minnesota to invest in businesses and people right in their neighborhood, keeping the money local.
Want to support that running store or craft shop on the corner? MNvest makes that possible, democratizing investment opportunities. “For small businesses trying to raise money, this is an opportunity to bring in local supporters in to help fundsupport their businesses, to invest in their business, and to have the transaction side of that be easy for the investor and inexpensive for the business,” explains Scott.
MNvest makes it possible to funnel capital flow from both accredited and non-accredited Minnesotan investors through a streamlined, virtual portal system.
Currently, there are no limitations or guidelines for the amount of money that can be raised through MNvest online portals. Issuers- people or businesses raising the money- will set some amount that they want to raise through the MNvest portals. Equity raised will then sit in escrow until some percentage of that total set amount is reached for the issuer “to be responsible for the intention for using the money”. This amount it likely to be set by the issuer at 75-85% of the total funds to be raised, whatever minimal amount the business needs to be functional or reach some end goal. Just like in Kickstarter, the money sits in escrow until the total sum of capital is raised. If that goal is not reached, the funds are all returned to the investors.
For any potential equity investors, it’s important to recognize that no exchange is currently provided for underoffered by MNvest and any funds provided to an entitycash flow should be viewed as a long term investment in the success of the business. “In this scenario, if you make an investment in the local coffee shop or local hardware store, or whatever that local business is, it might be that your investment is just to know that you are able to go to that hardware store, know that it is still going to be there serving your community. But the anticipation isintention was for the business community to create anthe exchange so that a person like yourself and me could redeem our shares at some point in the future at a gain,” explains Scott.
The MNvest legislation was signed into law by Governor Mark Dayton last June, and quickly passed through the Minnesota House and Senate. The legislation hit a snag in the Commerce Department as new rules and processes needed to be created to support MNvest, but the final version of the law and regulations are expected to be released any day now. And then it’s off to the races.
NowAfter the base legislation is passed, the next step for MNvest.org is spreading the word, building a community around the created legal infrastructure, and most importantly finding issuers and portal operators to start using and trying out the system. The group will launch a new, updated website in the near future with lots of information for people wanting to invest or raise capital through athe MNvest approved platform.
MNvest holds great potential for the Minnesotan life science entrepreneur and startup.
“…I am really interested where the startup community wants to plug themselves into this initiative. In the life sciences…I would really be anxious to learn who the prospects are that might be willing to give this a try. And even if we are not quite ready, meaning that there is not a portal ready to begin having a conversation with the prospects, and laying out the understandings that are needed so that we are closer to being ready when the portals are ready,” says Scott.
Are you an entrepreneur interested in trying out MNvest to help finance your business? Contact MNvest.org at info@MNvest.org or click here to become a registered portal operator.