The first Michigan company to launch a crowdfunding campaign under a state law enacted late last year has reached it goal of raising $175,000 in startup capital after it got a boost from a single major investor last week.
The partners behind Tecumseh Brewing Co. plan to match the funding with a $200,000 loan from OSB Community Bank in Brooklyn and $145,000 invested by friends and family to open the microbrewery this fall in downtown Tecumseh.
The crowdfunding campaign conducted through Indianapolis-based Localstake Marketplace LLC, which operates the localstake.com portal, attracted 21 investors whose individual investments ranged from $250 to $122,000. The largest investor was accredited and came from the Ann Arbor area.
Tecumseh Brewing was the first startup business to mount an intrastate campaign under the Michigan Invests Locally Exemption (MILE) Act, which allows companies based in the state to solicit investments from Michigan-based investors without having to register with federal securities regulators.
Tecumseh Brewing General Manager Kyle DeWitt said the biggest lesson from the campaign was to network as much as possible with investors. During the campaign, the company held two tasting events and the partners spoke to as many groups as they could, he said.
“Do everything to get in front of people. Don’t turn down an opportunity,” DeWitt said. “It’s absolutely a numbers game.”
The microbrewery’s crowdfunding campaign was structured as a revenue sharing offering. Once the brewery opens, 7 percent of sales each month will go to pay back the investors until each investor receives one and a half times his or her investment.
Tecumseh Brewing’s 90-day campaign hit its goals in about half of the time expected. The campaign drew 110 people who filled out an investor profile on Localstake.com.
Early on in the campaign, the company used its Facebook site to direct people to its solicitation listing on localestake.com. The partners stopped the practice a few weeks ago, even though they were not specifically using Facebook to directly offer securities, he said.
As Tecumseh Brewing was in the middle of its campaign, the U.S. Securities and Exchange Commission issued new guidelines on the use of social media to promote an intrastate crowdfunding campaign. The SEC said companies can advertise their stock offerings, but only to residents in the state where the company is based.
Crowdfunding websites that conduct stock sales must take “adequate measures” such as disclaimers or restricted-access websites to ensure the stock offerings are made only to residents of the state. For small businesses mounting campaigns, that means using websites or social media to offer securities is generally not permissible under the SEC’s intrastate exemptions because they could reach potential investors outside of the state.
In a previous report, DeWitt told MiBiz that the crowdfunding concept really fit with the partners’ vision of creating a “community brewery” in downtown Tecumseh. In essence, the investors will become the advocates for the business as it prepares to launch and open its doors.
“It just opened up the opportunity for so many people to get involved in the brewery,” DeWitt said at the time. “They’ll be our customers, and they’ll also have a stake in the business. … If we have 120 investors and 90 or 100 of them are from Tecumseh, that’s 90 or 100 customers that we’ll always have.”