SAINT PAUL – Beginning June 20, Minnesota small businesses have a new way to seek investment funding from a broad range of Minnesotans, thanks to the state’s MNvest law with new rules for equity crowdfunding through the Internet.

Equity crowdfunding under MNvest allows Minnesotans to purchase securities offered by a Minnesota business, with the potential to share in company profits or otherwise receive a financial return on their investment.

“MNvest provides Minnesota entrepreneurs with a new opportunity to reach out directly to prospective investors in the state,” said Minnesota Commerce Mike Rothman, who serves as the state’s securities regulator. “It also provides Minnesotans with a new opportunity to invest in local startups and small businesses.”

Rothman added: “Financial opportunity often comes with risk.  As with any investment, prospective investors need to exercise diligence, carefully evaluate the company and understand all the risks involved.”

MNvest is limited to “intrastate” crowdfunding, meaning it applies only to Minnesota-based businesses soliciting funds from Minnesota residents. Separate “interstate” crowdfunding rules from the U.S. Securities and Exchange Commission (SEC) apply to businesses soliciting funds across state lines. The federal rules took effect on May 16 this year.

Key provisions of MNvest include:

• The investment must be offered only through an online MNvest internet “portal” run by a portal operator or broker-dealer registered with the Commerce Department.
• A company may raise up to $2 million in a 12-month period if its financial statements have been audited or reviewed by a certified public accountant.
• A company may raise up to $1 million in a 12-month period if its financial statements have not been audited or reviewed by a certified public accountant.
• Individuals may invest up to $10,000 in connection with a single MNvest offering, except for “accredited” investors with high incomes or net worth, who have no limit.

All investor funds must be held in escrow until the minimum amount stated in the offering is reached, and investors have the right to cancel their commitment for any reason until the minimum offering is reached.

Although MNvest was passed last year by the state legislature and signed into law by Governor Mark Dayton, the law required a formal rulemaking process to establish the details of how it would be implemented.

More information about MNvest is available at the Minnesota Commerce Department website (mn.gov/commerce).