The Great Lakes Renewable Energy Association kicked off its 2014 Energy Fair in Mason with a workshop in Crowdfunding. Crowdfunding enthusiasts gathered to learn about the MILE Act (Michigan Invests Locally Exemption) and its application for renewable energy projects and more. With crowdfunding experts on hand, attendees received a plethora of information.
Crowdfunding As A Capital Resource For Alternative Energy Projects:
Tom Stanton laid the framework how Michigan businesses and residents are poised to implement renewable energy projects, as he estimated there are $500 Million in smaller energy efficiency projects with 15% annual returns available annually. According to Stanton, with greater demand and better technologies and products, the opportunity for more energy efficiency projects is increasing every year. Finally, Mr. Stanton mentioned several Clean Energy sweet spots, including: Institutional revolving loan funds; Affinity Crowd Financing; Community Solar projects and PACE (Property Assessed Clean Energy) Districts. Clearly, the future is bright for more clean energy projects in Michigan moving forward.
The MILE ACT and Crowdfunding Explained:
Angela Barbash spoke about the MILE Act and its exemption from SEC Rule 147, thereby allowing an intrastate exemption for all who perform a capital raise with Michigan residents for Michigan businesses, non-profits or real estate deals. The Act calls for a 3 prong rule, where 80% of the company’s assets must be in Michigan, 80% of the revenue generated must be in Michigan and 80% of capital raised must be used in Michigan. The MILE Act also allows for crowdfunding to be held online or offline, with a company able to raise up to $2 M with audited financials.
An attorney in the Crowdfunding space, Michael Melfi, spoke about his interpretation of the MILE Act and how to avoid any problems with the Michigan licensing division (LARA). There was a spirited exchange on whether crowdfunding sponsors really need as much documentation as would be necessary for the Securities and Exchange Commission. Due to there being no clear case law on the matter and the fact the law is only 6 months old, Melfi strongly encouraged all those participating in capital raises under the MILE Act to seek competent counsel to avoid possible legal pitfalls.
Sandra Cochrane, technology business consultant from the Michigan Small Business Development Center (SBDC), spoke about successfully conducting a Crowdfunding campaign from scratch. Sandra strongly believes it behooves any interested party to initially consider a rewards based crowdfunding campaign, since it may be unnecessary to give away equity if the “crowd” is willing to support the idea without any financial remuneration. That being the case, the steps to conduct a successful “rewards based” crowdfunding campaign are no different than doing so for an “equity, revenue sharing or debt based” crowdfunding campaign. In other words, it’s difficult work no matter what crowdfunding model is employed. This opinion was certainly echoed by the last speaker at the event.
Kevin Hitchens, owner of Localstake, operates the first internet website portal in Michigan to have successfully conducted a “revenue sharing” crowdfunding campaign on behalf of Tecumseh Brewing Company. Kevin spoke of the “heavy lifting” necessary for business owners to consider before undertaking any equity, debt or revenue sharing crowdfunding campaign. He spoke of the variables leading to a successful capital raise of $175,000 by Tecumseh Brewing Company and Localstake’s early history in raising several million dollars of funding for companies in the Midwest. Mr. Hitchens indicated Michigan is blessed with a wonderful environment for successful crowdfunding capital raises, in large part due to the fact of a well written, expansive and almost universal concensus of the new state-based crowdfunding legislation. Once businesses, non-profits and real estate developers understand its ground breaking platform for raising capital, Localstake and other intrastate crowdfunding internet portals are sure to become busy.
Michigan is at the beginning of a true renaissance in which to diversify its economy and easily allow investment in its businesses, infrastructure and people. One of the more creative ways in which to do so is recent passage of the MILE Act. It will be interesting to see which businesses and industries gravitate to this new format to raise capital. Time will tell if crowdfunding becomes “all the rage” in Michigan that it has had in many other parts of the world. Stay tuned !
ROBERT E. MATTLER, Associate Broker, Attorney and LEED AP BD+C, is Director of Green Brokerage at Armada Real Estate Services in West Bloomfield, Michigan. He speaks, writes and reports about emerging green real estate and development issues in Michigan and elsewhere. Bob is a senior correspondent for www.greeningdetroit.com For more information, contact Bob at Greening Detroit (248) 762-4370; or by e-mail: Mattler@greeningDetroit.com