Angela Barbash, the founder of Reconsider and Revalue, has made it her mission to help investors back small businesses in their own communities. Now, thanks to legislation enacted in October, Barbash has a new tool in her “locavesting” arsenal: A first-in-the-nation local stock exchange.
Though details are still pretty sparse, House Bill 5273, which was signed into law on Oct. 21, allows for the creation of Michigan Investment Markets (MIMs), which will function as intrastate broker-dealers through which stocks in local businesses can be traded, bought, or sold. It’s a companion bill to the Michigan Invests Locally Exemption (MILE) Act, which was signed into law late last year. Both bills were sponsored by Rep. Nancy Jenkins (R-Clayton).
Even though Michigan is the first state in the U.S. to establish a framework where local small businesses could raise capital by selling stocks to Michigan residents, Barbash says there is still much to be done in terms of educating people about crowdfunding and investing locally.
In order to help raise awareness, Barbash launched Venture Local, an initiative to teach people in Washtenaw County about the new investment options permitted under the MILE and MIMs acts. Venture Local came out of work Barbash did for Washtenaw County, where officials hired her to investigate local investment opportunities the county might be interested in pursuing. Barbash decided to establish the Venture Local program and offer it to Washtenaw residents; she plans to roll it out to other parts of the state next year.
“Venture Local is designed to tackle the awareness and education gap,” Barbash says. “Once you’ve made people aware, how do you get them to act? Or do you just seed-bomb the community and see what sprouts? That’s what we need to figure out.”
As part of Venture Local, Reconsider will host community information sessions in Ann Arbor, Chelsea, Dexter, Manchester, Milan, Saline, and Ypsilanti over the next six months. (The first meeting was held Oct. 30 in Ann Arbor.) Revalue, Reconsider’s registered investment advisory firm, will also conduct local investor training sessions in Chelsea and Ann Arbor. In addition, Venture Local will offer scholarships to local businesses for investment readiness training.
“The national calls we’ve gotten confirm our research—nobody else has run region-wide campaigns for local investing,” Barbash says. “The goal is to have this be a turnkey, self-implemented solution for smaller towns. There’s a lot of excitement on the ground, but such a huge learning curve.”
Despite that excitement, so far only one company has successfully funded a project using the MILE Act: Tecumseh Brewing hit its goal by raising $175,000 from 21 accredited and non-accredited investors in a Localstake crowdfunding campaign.
Barbash says she’s not sure why more businesses haven’t tried the local crowdfunding approach to raising money. She filed an open records request with the Michigan Department of Licensing and Regulatory Affairs in an attempt to figure out how many companies have filed the necessary paperwork to take part in an equity crowdfunding campaign.
“We got 400 pages back, so clearly, people have filed but have not gone live,” she adds. “We’re going to try to track these people down and find out what happened.”
As Michigan citizen-investors grapple with the intricacies of the new legislation, Jenkins is already working to draft House Bill 5922, which would allow municipalities across the state to invest in small and local businesses as long as the company’s principal office, or more than half of their assets or employees, are based in Michigan.
Under current law, local municipalities with a pension system of more than $250 million can invest up to 2 percent of their funds in local small businesses. HB 5922 would lower the pension fund threshold to $15 million and allow these smaller municipalities to invest up to 5 percent of the system’s funds in local companies. The bill also caps the amount that can be invested in any one business at $100,000. HB 5922 is expected to be introduced when the Legislature reconvenes after Thanksgiving.
Even though Barbash says the public still has a lot to learn when it comes to local crowdfunding or stock exchanges, Michigan is doing far more in this area than other states.
“What’s fascinating is that all the calls we get are echoing that Michigan is way ahead of the curve compared to the rest of the country,” Barbash says. “That’s a huge opportunity, but it’s not sexy in the press. Michigan is getting all these accolades nationally, and nobody here realizes it.”
