UPDATE: there are exemptions to meeting the accredited investor requirement which you can read about here.
(Houston, TX) – Moylan’s Brewing recently put up a notice announcing that it is seeking to refinance $700,000 “away from the bankers” at 5% for eight years (looks like a loan). Saint Arnold Brewing also announced a fundraising round recently when it offered up 20,000 shares, all of which were sold. Saint Arnold owner, Brock Wagner, a former investment banker, clarified on Twitter this week that the rules of investment that they laid out in the offering, including a minimum income requirement, were required by federal law.
Up until now, it has been an all-or-nothing deal for those wanting to invest in private breweries like Saint Arnold or Moylan’s.
To be an accredited investor in the U.S., one “must have a net worth of at least one million US dollars, not including the value of one’s primary residence or have made at least $200,000 each year for the last two years (or $300,000 together with his or her spouse if married) and have the expectation to make the same amount this year.” If you don’t meet that criteria, you can still invest using a platform like Kickstarter but only for non-monetary/equity rewards.
Today, the Senate passed a crowdsourced funding bill that will change those rules, once reconciled with a similar bill in the House.
With these dangers in mind, certain measures have been written into the bill to protect both startups and their non-accredit investors. Under the amended legislation, entrepreneurs will be able to raise up to $1 million per year through SEC-registered crowdfunding portals. The bill also limits the amount of money people can invest based on their income.
For example, investors with an income of less than $100K will be capped at 5 percent, or $2K investments, and those with incomes over $100K will be capped at 10 percent, or $10K. On top of that, the bill also requires crowdfunding sites to provide protection, including investor education materials that inform people to “the risks associated with small issuers and illiquidity.”
Kickstarter should remain alive and well, assuming this gets signed into law. There will still be breweries that want to raise money without giving up equity. On the other hand, there are many drinkers out there that would like to have real equity in the suds.
That day is coming.