investment crowdfunding for wineries...advertising in connection with sales to accredited investors...
TRANSCRIPT
Investment Crowdfunding
for Wineries
February 17, 2017
2 A Little Bit About Me
Zach Robins
Email: [email protected]
Twitter: zjrobins
LinkedIn: https://www.linkedin.com/in/zjrobins
3 Winthrop & Weinstine
Entity Formation
State Licensing & Other Regulatory
Raising Capital (Traditional & Crowdfunding)
Trademark Protection & Brand Management
Distribution Agreements
Mergers & Acquisitions
Follow Us on Twitter @BrewLawyers
Representing over 75 breweries, wineries, cideries, and distilleries
4
Investment Crowdfunding
5 Congress Responds – JOBS Act
5
• As part of the JOBS Act of 2012, Congress directed the
SEC to develop new rules that would make it easier for
companies to raise capital from investors.
6 JOBS Act: Key Components
6
Advertising in
Connection with Sales
to Accredited Investors
Regulation Crowdfunding Reg A+ | “Mini-IPOs”
Title II Title III Title IV
Also called Rule 506(c)
Became effective in
October 2013
Growing in popularity
SEC released final rules
in March 2015.
Became effective in June
2015
Not very useful for small
businesses
Went into effect on May 16, 2016
7
7
8 Title III: Regulation Crowdfunding
8
Issuer Offering Limit:
$1 million in 12 months
Investor Limits:
If annual income/net worth < $100,000, limit is
greater of $2,000 or 5% of the lesser of
annual income/net worth
If annual income/net worth ≥ $100,000, limit is
lesser of $100,000 or 10% of the lesser of
annual income/net worth
9 Title III: Regulation Crowdfunding
9
Funding Portals:
Companies must sell through a portal
Registered with the SEC and FINRA Handles
funds for the company Posts company
disclosure information
10 Title III: Regulation Crowdfunding
10
Company Requirements:
Disclosure document, including MD&A
discussion and annual reporting
Issuers will be required to file Form C prior to
commencement of the offering, during the
offering if material changes occur, annually
after the offering, and at the conclusion of
their reporting obligations.
11 Title III: Regulation Crowdfunding
11
Financial information for two previous years:
-- tax return/financials ≤ $100,000
-- reviewed financials ≤ $500,000
-- audited financials > $500,000 (except first time
reviewed financials)
12 Title III: Regulation Crowdfunding
12
Certain advertising restrictions do apply (see
Rule 204)
Reg CF offerings will not be integrated with other
offerings
Restrictions on transfer exist within the first year
of purchase (except limited circumstances)
13
MNvest
Intrastate Investment Crowdfunding
14 Intrastate Crowdfunding
• Frustrated by the SEC’s inability to design a useable
system, individual states have adopted their own
Crowdfunding laws, which permit offerings between an
issuer and residents residing within the same state.
15
Only available to Minnesota-based companies.
All investors must be Minnesota residents.
Offerings can either be (a) exempt MNvest offerings; or (b) registered SCOR offerings.
Offerings must be made online through a “MNvest Portal” registered with the Minnesota Department of Commerce.
Issuers may create their own portal or work with a third-party host platform.
16 MNvest: Features
Non-accredited investors subject to $10,000 investment cap
Companies subject to $2,000,000 cap per offering
Companies must provide detailed disclosure documents
Funds must be held in escrow until funding target is reached
MNvest Portals subject to stringent recordkeeping requirements and general oversight by the Minnesota Department of Commerce
Statute: MN 80a.461 and Dept. of Commerce Rules §2876
17 MNvest: Changes
18 MNvest: Template Docs
19 Two MNvest Tracks
MNVest
Exemption
Track
MNVest SCOR
Track
Offering
Limit
$2M (or $1M
w/o reviewed
financials)
$5M
Eligible
Investor
s
MN residents
only
MN residents +
residents of
other states if
the offering is
also registered
in those states
Compan
y
Revenu
es*
80% of
company
revenues must
be derived
from MN
n/a
Locatio
n of
Assets*
80% of
company
assets must be
located in MN
n/a
Use of
proceed
s*
80% of net
offering
proceeds must
be used in MN
n/a
Advertis
ing
Must
implement
reasonable
measures to
limit
advertising to
MN residents
n/a
*replaced with residency test
20 MNvest: Players
Issuers
Portals Investors
Banks
Attorneys
/ CPAs
Developers
21 Planning For Your Offering
22 Planning For Your Offering
23 Planning For Your Offering
24 Planning For Your Offering
25 Parting Thoughts
25
I. Companies can now sell ownership of their business via approved funding portals.
1. Previously, crowdfunding was limited to rewards-bases services like Kickstarter.
II. For the first time in 80 years, 100% of the population can invest in public offerings of private companies.
2. Previously limited to the rich.
III. Fundraising will be easier with use of the internet but not easy.
3. Substantial regulations exist dictating how much can be raised from each investor.
IV. This new opportunity puts even more pressure on companies to be able to tell their story.
4. Business planning is paramount!
26 Parting Thoughts
26
1. Competition will be fierce. You must be able to set yourself apart from competing
offerings.
Consider mixing rewards in addition to ownership.
2. Investors may be able to get on the ground floor of the leading companies of tomorrow.
But this is not without risk. Many will fail!
3. Your success (or failure) in raising capital will be public.
So plan accordingly and build the right team of management and advisors (such
as lawyers, accountants and marketing) to help you succeed.
