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.