On Friday, May 30th the Institute for Entrepreneurial Studies at Adrian College held an all day conference on investment crowdfunding covering the new MILE (Michigan Invests Locally Exemption) Act. This was a fitting location for two reasons: Adrian College has a cutting edge Entrepreneurial Studies program headed by Dr. Oded Gur-Arie, a serial entrepreneur himself. Secondly, investment crowdfunding for Michigan began in Adrian and Lenawee County, conceived and nurtured by Chris Miller, Adrian Economic Development Director. Furthermore, the MILE ACT has been championed by Rep. Nancy Jenkins from Lenawee County and her legislative director, Andy Buss. Without the efforts from these individuals, Michigan would not be at the forefront of investment crowdfunding nationally as it is poised today.
Investment Crowdfunding As A Key Economic Development Driver
Crowdfunding is defined as the use of small amounts of capital from a large number of individuals to finance a business or help with a social cause. Investment crowdfunding creates a return on investment either through an ownership stake (ie. equity), revenue sharing generated by the investment or creation of a debt instrument (ie. loan to new venture). Investors who take debt or a revenue sharing position receive a pre-determined return on their investment that can be structured in a number of ways within an investment offering.
Under the MILE Act, every Michigan resident can now become involved in growing their local economy, supporting entrepreneurs, local real estate development projects and the creation of local jobs. Until now, private offerings were only available to “accredited investors”, which makes up less than 7% of our population. The MILE Act changes all that. Now that Michigan has this unique tool for economic development, local investing advocates such as Angela Barbash are taking initiative to educate the investment community about the unending options for their clients to “invest local”.
Ms. Barbash, Founder of Reconsider and Principal at Revalue, spoke about the work businesses need to consider before the capital raise, during the capital raise and following a successful capital raise. One of the best lessons learned from Ms. Barbashs’ session was to manage investors’ expectations from the start so they understand their role in the scheme of a new or expanding business. The Tecumseh Brewery capital raise, as the first business to successfully use the MILE Act, was discussed for lessons learned from its success.
Early Advice on Conducting A Successful Crowdfunding Campaign Under MILE
Following lunch with Rep. Nancy Jenkins who discussed her reasons for sponsoring the MILE Act, attendees had an opportunity to listen to her legislative aide, Andy Buss, who was largely responsible for drafting the legislation and played a key role in its successful passage. Mr. Buss indicated Michigan’s MILE legislation is garnering close inspection and admiration from other states who are themselves considering investment crowdfunding. The most pressing issues of the MILE Act including fraud, escrow accounts, residency and specific use of the portal were covered by Mr. Buss’s presentation and helped those in the audience understand potential pitfalls. Attorney Mike Olsaver also covered issues with patents and trademarks to further assist attendees with necessary protections available to entrepreneurs and businesses.
Similarly, Kevin Hitchens, owner of Localstake, guided those in attendance on a step by step approach towards a successful capital raise under MILE. With Tecumseh Brewery as their first successful capital raise under MILE, many will be seeking advice from Localstake on conducting a successful investment crowdfunding campaign under this new act.
Conclusion
The afternoon concluded with Dr. Gur-Arie’s discussion on items to consider for launching a successful crowdfunding project and some wonderful ideas from Jennifer Compton, Director of Public Relations at Adrian College, on using social media to reach the proper audience and ensure a successful capital raise. The Michigan Municipal League will soon rollout its new website, www.crowdfundingMI.com which should increase awareness of the MILE Act as another viable economic development tool for those interested in moving Michigan forward with more economic growth and real estate investment projects. Let the Pure Michigan Investment Crowdfunding initiative begin in earnest.
ROBERT E. MATTLER, Associate Broker, Attorney and LEED AP BD+C, is Executive Vice President of Funding Roots.com, a real estate investment crowdfunding website and associate broker at Armada Real Estate Services. He speaks and writes about cutting edge economic development topics and emerging green real estate issues in Michigan and elsewhere. Bob is also the senior news correspondent for www.greeningdetroit.com For more information, contact Bob at Funding Roots (248) 762-4370; or by e-mail: bob@fundingroots.com
