States take the lead on crowdfunding local investing
Three years ago, excitement ran high after congress authorized new rules to greatly expand the ability of small companies to raise investment capital via crowdfunding. While the SEC drags its feet on issuing the federal framework, state governments have seized the initiative; half the states have completed crowdfunding laws, and 11 more are working on it. “It’s exploded this year,” said crowdfunding advocate Anthony Zeoli in a recent NYT story. “People are clamoring for it, and those who see the power of it are pushing these agendas forward. I mean, who can say no to legislation designed to help open up capital for small and growing businesses?”
Success stories are coming in, though it’s also clear that businesses looking for capital are embracing the new funding platforms more rapidly than are investors. Click through for more details, and then consider looking for opportunities to support local businesses in your state.
The Times piece features a few successful small-scale projects, including a microbrewery in Wisconsin that raised $67,000 from 52 investors (pictured above), and a community in Kansas that raised $150,000, sold in $50 shares, to re-establish a local grocery store in town. But it also notes that many of the platforms established to compile these initial opportunities “look like ghost towns”—they’re having a hard time attracting potential investors. Projects with an established local presence, and are raising moderate sums, appear to be the most successful.
These state-approved programs cater to business and investors residing in each specific state; businesses are generally allowed to raise up to a set limit (often $1 or $2 million), and individual investors are usually limited to a cap of $10,000 or less. Still, by opening up these direct-investment opportunities to non-accredited investors, crowdfunded equity programs are a huge step forward for many small local businesses looking to expand. There is widespread hope that once the feds issue their final rules, this new form of investment opportunity may gain more widespread recognition and credibility; however, there are concerns that the SEC may impose more burdensome costs than had been envisioned.
Zeoli’s Crowdfunding Legal Hub is closely tracking the state-by-state initiatives; see this post for some recent coverage and to see if your state has an active program that you can use to seek out interesting opportunities. And click here to dig into other crowdfunding news and resources here on the Resilient Investor website.