MNvest

More Information

Minnesota Statute 80A.461
Minnesota Rules 2876.3050 – 2876.3060

Questions about MNvest?
Securities Section
Commerce Department
E-mail: Securities.Commerce@state.mn.us
Phone: 651-539-1638

Think you may have been a victim of an investment scam or fraud?
Consumer Services Center
Commerce Department
E-mail: consumer.protection@state.mn.us
Local: 651-539-1600
Greater MN only: 800-657-3602

You can also file a complaint online by selecting “Securities” under the Industry option.

Investing in local startups and small businesses through crowdfunding

Beginning on June 20, 2016, Minnesotans have a new opportunity to invest in local businesses and startups through the MNvest Securities Registration Exemption (or “MNvest” for short.)

MNvest allows eligible businesses to engage in equity crowdfunding campaigns – an online strategy to raise small amounts of capital from a large number of people. With MNvest, a Minnesota business can solicit investment funds from Minnesota residents in exchange for a financial interest in the business or other potential financial incentives.

Equity crowdfunding is different from donation-based crowdfunding through websites like Kickstarter or GoFundMe. Participants in a donation-based crowdfunding campaign contribute money without the promise of anything in return (other than possibly a T-shirt or other benefit of minimal value). Investors in an equity crowdfunding campaign have the opportunity to share in both the risks and the rewards of the business in which they invest.

MNvest is limited to “intrastate” crowdfunding, meaning it applies only to Minnesota-based businesses soliciting funds from Minnesota residents. Separate “interstate” crowdfunding rules from the U.S. Securities and Exchange Commission (SEC) apply to businesses soliciting funds across state lines. The federal rules took effect on May 16, 2016.

MNvest is not administered by the Minnesota Department of Commerce or any other state agency. MNvest is only a shorthand reference to a 2015 amendment to the Minnesota Securities Act (Minnesota Statutes, section 80A.461). MNvest offerings are exempt from state registration requirements and are subject to very limited regulatory oversight by the Commerce Department.

Risks
Eligible companies
Limitations
Canceling an investment

Risks Associated With MNvest Offerings

Although MNvest provides a new opportunity for Minnesotans to support and invest in local businesses, there are inherent risks associated with investing in a MNvest offering. These include:
- Business failure: Many new businesses fail. Even the most well-intentioned, intelligent entrepreneurs face stiff competition and often struggle to cover costs while getting an idea or product off the ground.
- Fraud and scams: Crooks and scam artists are always looking for new ways to take advantage of unsuspecting investors— especially when a change in law creates confusion or unforeseen regulatory loopholes that can be exploited.
It is important for potential investors to carefully evaluate a business and its MNvest offering to understand the risks of making an investment. The Commerce Department encourages prospective investors to ask the following questions before investing in a MNvest offering:

Is the offering made via a registered portal operator or broker-dealer?

All MNvest offerings must be made via either a portal operator registered with the Commerce Department or a registered broker-dealer. Portal operators registered in Minnesota are listed on the Commerce website. Registration information for broker-dealers is available on the FINRA BrokerCheck site. Check these websites before you invest in any MNvest offering.

Registration does not mean the offering is endorsed by the Commerce Department, nor is it a confirmation that the portal operator or broker-dealer is in compliance with all applicable regulations. An effective registration only means that the portal operator or broker-dealer has filed all documentation necessary for registration with the Commerce Department.

What are you promised in return for your investment?

You may have seen an advertisement or been approached by an acquaintance telling you about an investment opportunity. What are you promised in return for your investment? How well do you understand the risks of making the investment?

MNvest issuers must ensure that the portal operators they work with provide a detailed disclosure document to investors before an investment is made. This document should contain important information about the issuer’s business plan, including;
- The financial condition of the business;
- The identity of owners, operators and directors of the business;
- The terms and conditions of the securities being offered; and
- Other important information for an investor to consider.
Do not invest in any offering before you have received, reviewed and understood the disclosure document and evaluated the potential risks of making an investment.

Investment Red Flags

Remember, many new business ventures fail--and even successful businesses rarely become profitable overnight. You should think twice about investing in an offering that:
- Promises a quick return on your investment (“you’ll get all your money back, and more, within 6 months”)
- Promises an unreasonably high rate of return (“you can expect a 12% return on investment”)
- Requires you to make a quick decision (“this offer is only good for the next 24 hours”)
- Minimizes risks (“this offer is completely risk free!”)
- Is short on details about the business plan, operating history or owners/operators of the business
- Attempts to limit the liability of the issuer, or any other person, for fraud or intentional misrepresentation in connection with the offering
- Otherwise seems “too good to be true”
What do you hope to get in return for your investment?

Carefully consider your own motivations and expectations when making an investment. You may find that your primary motivation is to support a friend or neighbor starting a business, or to help a new restaurant or shop open in your community.

The primary motivation could also be a financial return. In either case, it is important to think carefully when deciding how much money to invest. Just because you are purchasing a security does not ensure you will make money on your investment. It is important to consider the possibility that you may lose the full amount that you invest.
Eligible companies that may use the MNvest exemption

The MNvest exemption is available only to a business entity that:
- is organized under the laws of Minnesota;
- has its principal office in Minnesota;
- is not a general partnership;
- otherwise satisfies Section 3(a)(11) of the Securities Act of 1933 and Rule 147 adopted thereunder; and
- otherwise satisfies the requirements of Minnesota Statutes, section 80A.461
The MNvest exemption is not available for:
- Offerings involving petroleum exploration or production, mining, or other extractive industries (such as oil, gas or mining industries);
- Offerings relating to investments in virtual, digital, or crypto currencies (such as Bitcoin.)
- Offerings conducted concurrently through multiple MNvest portals
- Offerings involving an investment company as defined by the Investment Company Act of 1940
- Offerings which propose to issue stock or other equity interest in an entity that has not yet defined its business operations, has no business plan, has no stated investment goal for the funds being raised, or plans to engage in a merger or acquisition with an unspecified business entity.
Limitations on investments for MNvest offerings

The amount you can invest in a MNvest offering is partially determined by whether you are considered an “accredited investor.” The term “accredited investor” is defined in federal law to include natural persons who have a net worth of $1 million or more, or who have earned a yearly income of $200,000 or more (or $300,000 jointly with a spouse) for the past two years and expect to continue to earn a similar income in the future. (The full definition of accredited investor is in Rule 501(a) of Regulation D adopted pursuant to the Securities Act of 1933.)

If you do not meet the definition of an accredited investor, you may invest up to $10,000 per MNvest offering.

If you are an accredited investor, there is no regulatory cap on the amount of money you can invest in a MNvest offering. However, a MNvest issuer can raise no more than $1 million in any 12-month period (or no more than $2 million in any 12-month period if the issuer’s financial statements have been audited or reviewed by a certified public accountant).
Canceling an investment

An investor in a MNvest offering may cancel an investment commitment for any reason until the target minimum offering amount has been raised. The “target minimum offering amount” is an amount set by the issuer and is included in the disclosure document or other materials made available to you when you considered making an investment.