Fostering a culture of entrepreneurship is one of the League’s eight assets that Michigan communities need to grow and strengthen, for our state to sustain and prosper in the 21st century. Nothing promotes that culture as much as this new crowdfunding opportunity. This new community investment tool is a natural extension of placemaking and we intend to promote this in the next several months through training and educational materials.
First off, let’s make a clear distinction between this law and the crowdfunding initiatives you may have already heard of. This new law allows for “investment” crowdfunding, where a Michigan business can solicit funds from Michigan residents directly or through an online platform to help spur their business in exchange for an actual return on investment. This ROI is what makes this different from other initiatives you’ve heard of like, Kickstarter. Those are “reward based” crowdfunding initiatives, where people donate to a cause or product because they believe in it. Perhaps they get a T-shirt out of the deal, but there is no actual investing. That’s what this legislation allows for – being able to use this as an investment tool. And, it’s what makes this opportunity so appealing.
Crowdfunding fosters entrepreneurship and economic development. It’s a way for residents to support local businesses and invest on Main Street rather than Wall Street. And, we believe it’s a game changing opportunity for Michigan communities. Creating and sustaining vibrant communities requires unique places with local flavor-and those types of businesses can seem risky to traditional financiers. This can now fill a void in traditional financing where a business start-up might not qualify for the funding they need for various reasons, including additional hurdles because of their desire to rehab an old historic structure or a lack of enough start-up capital. The economic impact of citizens being able to put their resources into helping develop their community-and get something out of it in return-could be magnificent.
This new law benefits residents, small businesses, and communities alike. The new law in Michigan is the most favorable in the entire country, and an excellent conduit to support additional place based initiatives.
This initiative has very exciting potential and the League is in the process of developing a Michigan-based website where start-ups, community leaders, and investors can go and learn about crowdfunding in Michigan, as well as start the process through a couple of partnerships we’ve developed with Localstake and Fundrise. These national companies have proven track records helping spur the development of businesses and real estate. We are also in the process of developing a public space crowdfunding initiative, that we hope to be able to announce soon.