New MNvest Bill Would Take Homegrown Crowdfunding to the Next Level

It's like Kickstarter, except instead of donations for goods or services anyone could buy dividend-paying shares in a venture

It's like Kickstarter, except instead of donations for goods or services anyone could buy dividend-paying shares in a venture

A new bill introduced in the state Senate last week would allow anyone in Minnesota to support homegrown entrepreneurs by buying a piece of their idea or company.

It's like Kickstarter on steroids. Kickstarter allows backers to prepay for goods or services. This initiative, called MNvest, would legalize crowdfunding equity. Backers buy a stake of an idea, product, or company by purchasing dividend-paying shares to help finance entrepreneurial dreams. See also: "Common Man" Dan Cole Documentary Is On Kickstarter

Locally, Marshall Saunders is on the forefront of the crowdfunding equity movement. He sold his stake in the largest ReMax real estate franchise in the world last September to start, which launched about a month ago.

The website offers investors a chance to buy a stake in real estate purchases Saunders lines up.

"I lay out the deal and all of the numbers and projections and let people decide if they want to invest," he said.

Investors get a chance to make money off of a local property, but Saunders has total control and assumes all risk. He makes money three different ways:

  • He automatically owns 10 percent of each deal before putting any money in.
  • He charges a 3 percent fee on the initial buy-in.
  • He collects referral fees from real estate agents.
  • Saunders will continue with his venture even if the MNvest bill fails, "but it won't be nearly as fun" just working with accredited investors.

    "I want to open up investment to a wider range of people who want to invest in their community and want to have a very tangible asset to invest in," he said. "It's something they can see, feel, drive by, and look at every day."

    This concept was technically legalized on a national scale by the 2012 JOBS Act, but that only allowed accredited investors -- families who make $300,000 per year or individuals who pull in $200,000 per year or have a net worth of $1 million, not counting their primary residence -- to participate.

    The SEC was directed to come up with rules to allow regular folks to join in, but after more than two years the notoriously slow federal government is still dragging its feet. Now 13 states frustrated with the SEC's stalling have passed legislation similar to MNvest as a workaround.

    When Wisconsin passed its version of MNvest, was one of the first sites that popped up. It specializes in getting people to invest in new breweries, a natural fit for an industry with giant start-up costs.

    Imagine being able to buy a piece of Bauhaus Brew Labs or Insight Brewing when their plans are announced, instead of shelling out $50 for a growler and a t-shirt.

    Here's some of the nitty-gritty details on MNvest:

    • The bills are SF 204 and SF 138, sponsored by two Republicans and three Democrats.
    • Non-accredited investors can invest a maximum of $10,000.
    • Companies can raise a maximum of $2 million without an audit, and $5 million with an audit.
    • Investors must have Minnesota residency and companies must have at least 80 percent of its assets in Minnesota.
    • The bill will get its first hearing in the Commerce committee January 28 at noon.

    Send news tips to Ben Johnson.