A bill that makes it easier for start-up companies to raise capital in Minnesota became law Monday when Gov. Mark Dayton signed the legislative session’s omnibus spending bills.
The new provision makes it legal for entrepreneurs to raise money through equity crowdfunding — think Kickstarter, except rather than making a donation, the investor actually buys a stake in the company.
“Really excited, really bullish on the prospects of it,” said Zach Robins, a Minneapolis attorney who co-founded MNvest, the group pushing for the bill. “On the other hand, we expect the Department of Commerce to write regulations to permit companies to raise money.”
The law gives entrepreneurs the chance to raise money from the general public even when they can’t attract the attention of a venture capitalist or angel investor. The legislation gathered support from the Minnesota Chamber of Commerce, LifeScience Alley, the Minnesota High Tech Association and the Minnesota Black Chamber of Commerce.
Equity crowdfunding was supposed to be legal nationwide by now, enabled by the 2012 JOBS Act. But federal regulators have dragged their feet over worries that people will use crowdfunding to steal money from investors. Advocates fear that when the federal rules are finally adopted, they will be so burdensome that deals won’t happen.
Several states, including Wisconsin, have already passed crowdfunding laws.
But even though equity crowdfunding is technically legal today in Minnesota, it can’t start. Anyone who would like to open a portal for accepting crowdfunded investment — either on behalf of other companies or for their own start-up — must wait for the state’s Commerce Department to write the regulations.
“It does have to go through a rule-making process,” said Ross Corson, the department spokesman. “That requires public comment period.”
Corson said an exact timeline for that process is unclear.