KALAMAZOO — Thell Woods finally is pushing ahead with a series of crowdfunding platforms across Michigan that small business owners can use to raise startup capital from local investors.
Woods, a commercial real estate agent and a former securities broker from Kalamazoo, launched a dozen crowdfunding platforms last week, each dedicated to a geographic region of the state.
The principal of Crowdfunding Services LLC, Woods envisions entrepreneurs using one of the “community-centric” crowdfunding platforms to mount equity offerings under the Michigan Invests Locally Exemption (MILE) Act, a state law enacted in late 2013 that allows Michigan-based companies to raise startup capital from Michigan investors.
The web-based platforms, at c3funding.com, could also handle campaigns by local nonprofit organizations seeking to raise funds locally for a specific project.
“We’re trying to combine them both,” Woods said. “We’re trying to get the energy of the entrepreneur and the benefits to the community of a nonprofit.”
Crowdfunding Services initially will operate the regional platforms as it seeks a local director for each of them. The local director would buy the platform for $10,000, with $1,000 down. Crowdfunding Services would help a buyer raise the rest and continue to support the software and platform under contract with the owner, who would pay a fee of 2 percent of successful crowdfunding campaigns.
“We want the people in the community to have an interest in it and own these,” Woods said. “If (a platform owner) is in their own community and they’ve invested in it — and they put their energy and commitment to it, and they’re identified with it — it makes it work better.”
Small businesses raising startup capital could use the platforms for debt, rewards-based or equity campaigns, the latter of which is allowed under either the MILE Act or new federal regulations the U.S Securities and Exchange Commission recently enacted.
Woods first floated the idea two years ago for a series of local crowdfunding platforms across the state. He’s worked since then to build the software behind the platforms and waited for the SEC to issue its final rules, which came out in October after a lengthy delay. Those federal rules take effect in May.
Viewing the rules that the SEC adopted as too onerous, he concluded that the state MILE Act is a better option and fit for his platforms.
“Now we can do it with a little more clarity,” Woods said.
Enacted by the state Legislature as the SEC process to draft and adopt federal regulations for equity-based crowdfunding drew on, the MILE Act allows small, intrastate equity offerings by Michigan-based companies to investors in the state. Unaccredited investors can put up to $10,000 into a single issuer. Accredited investors can make unlimited investments.
Issuers can raise up to $2 million every 12 months if they make their financial statements available to investors and state regulators, and up to $1 million if they don’t.
Woods hopes each new platform can “reasonably” handle $2 million to $3 million in campaigns annually in the first year and ultimately each do $10 million annually.