Equity crowdfunding allows entrepreneurs to sell private securities in their company to investors. These offerings are usually restricted to large “accredited” investors who meet certain wealth and…
Equity crowdfunding allows entrepreneurs to sell private securities in their company to investors. These offerings are usually restricted to large “accredited” investors who meet certain wealth and income standards. Now, Minnesota has made it possible to sell these securities to any resident of Minnesota. The MNvest law, which went into effect in June 2016, makes it legal for businesses to release equity crowdfunding offerings to Minnesota residents regardless of their wealth. Patrick Saxton saw the opportunities that this new law provided and formed MNstarter to help businesses launch successful equity crowdfunding campaigns.
Q. What led to this point?
A. I worked with the Department of Veterans Affairs, first as a business analyst in the benefits division, then as the primary Information Security and FISMA policy writer for 23 regional offices. I spent my remaining time in government working at the Small Business Administration (SBA) , helping entrepreneurs start and grow their small businesses and working to expand SBA’s reach in Minnesota. I am now working as a software engineer and completing my degree in computer application development at Metropolitan State University.
Q. What is your business?
A. MNstarter is a public benefit corporation whose mission is to grow Minnesota companies through local investment. MNstarter is a registered MNvest portal operator and advocate for capital crowdfunding.
MNstarter offers free access to the MNstarter.com MNvest crowdfunding portal along with best practice guides for self-service capital crowdfunding campaigns. It also offers access to the MNstarter Resource Library, which is an organized group of “resource partners” who can work directly with entrepreneurs to navigate legal, finance and marketing considerations to get their capital campaigns set up.
Q. Where do you go for help when you need it?
A. We go to the MNstarter Resource Library and the folks at MNvest.org, the outreach and advocacy group for the MNvest legislation.
Q. What is the origin of the business?
A. MNstarter was started after I watched a 1 Million Cups presentation at the James J. Hill Center by Zach Robbins and Scott Cole. I went back to our office and started to talk about the MNvest law and over the next few weeks we had a core group of us that were ready to make MNstarter a real company. About three months after we started, Judy Wright, our fifth and final founder, found us on the internet and emailed us the same week we had decided to go looking for a finance specialist to round out our group. Since then, the five of us have been working to help Minnesotans find ways to meet their business and investment goals.
Q. What problems does your business solve?
A. MNstarter solves the need created by new Minnesota MNvest legislation that permits intrastate investment crowdfunding through securities offerings exempt from Securities Act registration. The MNVest law allows companies to sell equity in their companies to Minnesota residents. Minnesota residents not considered “accredited investors” have equal opportunity to invest in these offerings. Under most federal rules, non-accredited investors would not have this opportunity. This creates a larger pool of possible investors. It also gives all Minnesotans the opportunity to invest locally.
MNvest went into effect in June 2016, and requires that these MNvest “offerings” must be made online through a “MNvest Portal” registered with the Minnesota Department of Commerce.
Lots of times we hear “buy local”. At MNstarter, we like to say, “buy local (businesses) .”
Q. Where did you pivot in your company’s journey? What big obstacle or hurdle did you have to overcome?
A. We pivoted in summer 2017 as we discovered an increasing demand for portal access from organizations throughout greater Minnesota. Initially, we wanted MNstarter to work directly with business owners, to set them up on the MNstarter portal and run successful capital campaigns. Geographic distance between us and businesses through the state soon became our greatest obstacle. We realized that we could build greater value by forming partnerships with organizations throughout Minnesota. We bring portal access and crowdfunding tools to these organizations, while they leverage their local networks and resources on behalf of their communities’ specific needs. This approach allows for greater visibility of MNvest capital campaigns to potential investors.
Q. What are you most proud of?
A. I’ m proud of how well the entrepreneur community has embraced MNVest and MNstarter. By no means is this due to us, but I am proud to be from a place that embraces new ways to make businesses, communities and individuals more likely to succeed and the way in which we all reach out to one another and work with each other in order to achieve these goals.
Q. What obstacles must you overcome to be wildly successful?
A. We define success as successful MNvest capital campaigns. One of the biggest challenges is awareness. When every Minnesotan knows that they can invest in local businesses through MNvest offerings, we’ ll consider that a wild success!
Q. How are you funding your business — organically, angel or VC investments?
A. We started out being self-funded. Now as we grow, we’ re organically funding our activities by adding revenue streams that coincide with our portal services.
Q. What would be success for your business in the next 2-3 years?
A. In the next 2-3 years, we’ ll have transitioned MNstarter from a public benefit corporation to a nonprofit. We’ ll continue to build our portal capabilities, including expanding the types of offerings we allow to include more than just MNvest offerings and automate as much of the setup process as possible. Another large initiative will be an investment crowdfunding education program built specifically for investors.
Q. In your opinion, what does it take to be a great entrepreneur?
A. Great entrepreneurs come in all shapes and sizes. The ones I know each have something in them that drives them. Sometimes it is a need to make change for the better, sometimes it is just a project that holds a special place in their hearts, and sometimes it is just to make money. Most of the successful entrepreneurs I know have an ability to self-actualize and identify their personal shortcomings. They tend to surround themselves with people that have opposite skill sets and complementary skill sets.
Q. What is your business model and how do you make money?
A. We don’ t charge anything to businesses who list on the MNstarter portal, nor do we charge transaction fees to investors.
