Michiganâ€™s new crowdfunding law allows residents to make financial investments in their community through a unique and innovative platform. Known as the Michigan Invests Locally Exemption (MILE), the structure provides investors a return on their investment through an ownership stake or debt position. Any business can use the online funding platforms to raise money, and any Michigan resident can make investments.
Before MILE, almost all entrepreneurial investments in Michigan have revolved around venture capitalists and accredited investors (people who have a net worth of at least $1 million and an income of more than $200,000 â€“ so only the top 3% of the population). Now, anyone who wants to support local business owners and entrepreneurs can have a financial impact on their communities. All of the risk of a traditional investment still applies, but with more people, literally, invested in a business, the more likely the business will have the support they need to succeed.
Michiganâ€™s First Crowdfunded Business
Tecumseh Brewing Company is the first Michigan business to be successfully funded through the new law. The two business partners received seed money from friends and family to get things going but needed to raise an additional $175,000 to open their doors. Because traditional financing is particularly challenging for new businesses to secure, they decided to give crowdfunding a try.
The owners got creative to spread the word about their new business and investment opportunity by inviting the community to a beer tasting event. In just a few weeks, Tecumseh Brewing Co. raised their goal of $175,000. With money secured and the community excited, the partners are preparing to open their doors in the coming months.
Crowdfunding Public Spaces
Patronicity is a crowdfunding platform, similar to Kickstarter or Indigogo, but Michigan-specific. Patronicity recently partnered with the Michigan Economic Development Corporation (MEDC) on a campaign to promote and fund public projects.
MEDC will match funds raised on Patronicity, up to $100,000, for select public projects. Both municipalities and nonprofits can raise money to create parks, public art, trails, or anything else that activates a community space.
Midtown Detroit Inc., a community development nonprofit, is hoping to raise $50,000 to transform an alley on Second & Selden into an active public space with outdoor seating, sustainable landscaping, creative lighting, and welcoming architecture. With less just less than $30,000 to raise in 21 days (as of the morning of July 3), the campaign is off to a good start!
The opportunities are endless with Michiganâ€™s new crowdfunding legislation. Weâ€™re confident the law will help the state attract and retain talent, promote entrepreneurship, and enhance personal connections to Michigan communities.
Additional Information & Supporting Research
- Crowdfunding MI â€“ A website operated by the Michigan Municipal League explaining all things crowdfunding. The FAQ page is particularly helpful to understand the nuts and bolts of MILE.
- MML How-To: Tecumseh Brewing Company â€“ Our case study on Tecumseh Brewing Companyâ€™s path through Michigan crowdfunding.
- The Atlanticâ€™s The Urban Shift in the US Start-Up Economy â€“ A new report show that urban areas are becoming the center of gravity for venture investment and start-up activity.
- National League of Citiesâ€™ Supporting Entrepreneurship and Small Businesses: A Tool Kit for Local Leaders â€“ The report outlines how local governments can support entrepreneurs and small businesses in their community by highlighting roles in city hall, potential partners, and highlighting successful examples across the country.
- The Brookings Instituteâ€™s The Rise of Innovation Districts: A New Geography of Innovation in America â€“ Innovation districts are areas where anchor institutions ad companies connect with start-ups and incubators through mixed-use housing, office, and retail options. This report illustrates the trend, the importance of innovation districts, and how communities can help support these areas.
- The American Independent Business Alliance: The Multiplier Effect of Local Independent Business Ownership â€“ This report highlights the importance of supporting independently-owned, local businesses and their positive impact on the economy.