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Posts Tagged ‘MILE Act’

Michigan Entrepreneurs and Small Businesses: Crowdfunding Law Update.

Last year  Representative Tom Barrett introduced House resolution2015-11-26-13-04-02 235 (HR 235)

“to support the (SEC)’s recent adoption of rules…to facilitate small and start-up companies’ access to capital raised through crowdfunding.”

The resolution supports crowdfunding as viable tools for start-up businesses.

The resolution acknowledges:

Businesses in Michigan have greatly benefited from the opportunities created by the…Michigan Invests Locally Exemption (MILE) program. MILE has allowed everyday Michiganders, referred to as unaccredited investors, the ability to play a larger role in growing Michigan’s creative business ventures through Michigan-based crowdfunding platforms while still enjoying investor protections and security in their investments” (Emphasis added.)

 

Is Crowdfunding a Viable Option in Michigan?

Fast forward to today,  MIBiz recently reported that Michigan’s crowdfunding law hasn’t gained much traction

However, it may remain a viable tool for cash-strapped startups and the Michigan legislature has not given up on it.

 

Yesterday the Michigan House passed HB 4035 that amended the Michigan Invests Locally Exemption to Intrastate Crowdfunding.

 

According to yesterday’s announcement from the Michigan House Republican Website:

The amendments contained in HB 4035 “will expand the program so people can also invest in small businesses primarily doing business in the state and allows Michigan’s law to remain active under new Federal regulations

You can check out the House Fiscal Agency’s Analysis Here

The HB now moves to the Senate Commerce Committee for consideration.

 

Entrepreneurs and Start-ups:

 

Proponents of Crowdfunding: access to capital.

A while back Candace Klein Chief Strategy Officer at DealStruck was Interviewed by CrowdfundInsider and talked about how small business might benefit from crowdfunding. She had this to say, in part:

“Most businesses are community-based, and have an immediate impact for those in their community, whether geographic or industry-based.  Crowdfunding brings these companies together with the everyday investors in their communities.”

 

Crowdfunding for Social Enterprise?

I agree. As I’ve previously written about, crowdfunding appears to be a viable tool for community based businesses.

People are willing to invest in projects that will enhance their local community.

This is what makes local equity-based crowdfunding attractive for social entrepreneurs.

This is what makes local equity-based crowdfunding attractive for social entrepreneurs.

 

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka

www.dwlawpc.com

Social Entrepreneurs and Small Businesses – Update on Intrastate Crowdfunding

May 14, 2015 1 comment

A recent Detroit Free Press article highlights the success of Tecumseh Brewing Co, the first business in Michigan to utilize Michigan’s intrastate crowdfunding exemption to securities registration, commonly referred to as the MILE Act.

Crowdfunding: Potential for Start-up Businesses.

As the Free Press article explains, The story of Tecumseh Brewing Co highlights why equity crowdfunding is attractive to small startup businesses who may struggle to secure conventional financing.

“We went through bank after bank. They couldn’t justify giving out a loan to two guys starting a business,” said Kyle DeWitt, general manager and cofounder of Tecumseh Brewing Co.”

Without a doubt – the ability to reach a large pool of investors that were previously unreachable due to Securities Law restrictions is attractive to small businesses.

More States Enact Laws Permitting Intrastate Crowdfunding

Yes, as the Free Press article describes, states are realizing that intrastate crowdfunding can be a viable tool for small businesses. Per the Free Press’s calculation, 23 states have enacted laws permitting crowdfunding, and a dozen more states have proposed bills.

Crowdfund Insider, through  Illinois Crowdfunding Attorney Anthony Zeoli, recently provided a nice “big picture” update on the state of Intrastate Crowdfunding. Check out that article here

Problem Areas

potential abuse

Attorney Zeoli’s article also recognizes the problem areas of crowdfunding exemptions enacted by many states.  The obvious areas of concern often identified by regulators is the potential abuse of such exemptions by scammers and frauds, who may want to take advantage of an “unsophisticated investor.”

limited utility

Another such problem affects the “utility” of the laws; particularly, the limitation on real estate holding companies to utilize many intrastate crowdfunding exemptions.

Attorney Zeoli advises legislators to more narrowly tailor this exemption – I’d be in favor of a Michigan amendment such as is proposed in Illinois HB 3429.

With all of the development and revitalization efforts in Detroit, check out this recent article about the Brush Park Development, Grand Rapids, and other major cities, so long as disclosure safeguards are in place, why not make it as easy as possible for local investors to own a project in their local community?

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.co

Local Businesses: More on Crowdfunding

January 20, 2015 Leave a comment

Is Crowdfunding Right for Your Business?

An interesting article in Crain’s Detroit addresses crowdfunding and whether its right for businesses. Check it out here.

The article is meant for small and large businesses alike to consider whether or not crowdfunding is a viable source of funding for their respective businesses. The article addresses “rewards based” crowdfunding and “equity” crowdfunding, but let’s just consider “equity” crowdfunding, particularly, Michigan’s intrastate crowdfunding Exemption – the MILE Act. For more on the MILE Act, check out some of my prior posts.

Crowdfunding and Local Community-based Businesses.

One point that came out of the article was that crowdfunding, if it is a viable funding tool, is best suited for small local businesses.

I certainly agree that local businesses, who intend to stay local, are well-suited for crowdfunding. In fact, that was a goal of the Federal JOBS Act.

As the State of Texas has recognized in promulgating its own rules on intrastate crowdfunding:

“The legislative history of this federal provision [JOBS Act] suggests that the exemption was intended to apply only to offerings genuinely local in character, which in reality represent local financing by local industries, carried out through local investment.”  You can check out Texas’ Intrastate Crowdfunding Rules here

The Michigan Municipal League stated in the Crain’s Article that long-standing community-based businesses can benefit from crowdfunding, since those businesses would have name recognition in the community, and proven track record to stick around.

Crowdfunding is Met with Skepticism.

Not surprisingly, most of the attorneys interviewed react to crowdfunding with some skepticism.

“It’s such a gray area that a lot of attorneys just say, “I don’t know’ and take a conservative approach,” said Kevin Hitchen, co-founder of Localstake. “That’s why you don’t see a lot of businesses (using MILE). It’s restrictive.”

Indeed, as a lawyer, my job is to protect my clients from liability, it is hard to fully protect clients from the unknown.

As I’ve previously indicated, the State of Michigan appears not to be anywhere near ready to propose rules to help guide the MILE Act Implementation. Without this guidance, it certainly makes life difficult for Michigan business lawyers advising their client’s on MILE Act compliance.

However, I don’t believe that justifies labeling the MILE Act as a fad that will soon fade away. At a minimum, it is a tool that local entrepreneurs should consider for local (and lasting) economic development.

As I’ve previously written, I believe crowdfunding is a useful tool for social entrepreneurs who want to invest in a local community. Detroit, Grand Rapids, and other urban communities are good examples of communities ready for entrepreneurs to “take the leap” into intrastate crowdfunding.

Michigan is Not Backing Away From Local Crowdfunding

On October 21, 2014 Governor Snyder signed into law HB 5273 which created a “Michigan Investment Market” to local intrastate crowdfunded securities. You can check out the legislation here

The intention  of the “Michigan investment market” would be to connect buyers and sellers of local securities. You can review the New York Times article titled “A Way for Local Businesses to Grow” about the new law here

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com