In 2014, when Facebook announced it had spent $2 billion to purchase the virtual reality headset maker Oculus VR, the deal seemed to exemplify a basic formula for startup success: show the technology community a promising concept, raise money to support the work of turning that concept into a marketable product, and cash out.
Not everyone who put money into Oculus before the Facebook (NASDAQ: [[ticker:FB]]) acquisition profited from the deal, however. That’s because beforehand, Oculus had not only received equity investment from venture capital firms, but also raised nearly $2.5 million from 9,000-plus backers in a campaign on the equity-free crowdfunding website Kickstarter.
Stephen Dinehart believes that crowdfunders should be able to get a piece of the pie when they back startups. He is the founder of MoolaPitch.com, a crowdfunding portal launched last week that’s aimed at connecting investors and entrepreneurs in Wisconsin and netting investors returns if the startups they back eventually gain traction.
Dinehart was once an entrepreneur but more recently he has worked in investment banking, focusing on private placements as well as mergers and acquisitions. While working directly with early-stage companies to help them raise money isn’t his bread and butter, he’s interacted with enough startup founders to learn that it’s an area in which they often struggle.
“One thing I was seeing out there was demand for seed capital—anything from $50,000 to $500,000,” Dinehart says. “Those are tough raises to do, and it’s not really in my wheelhouse.”
Plus, he says, the legal fees startups typically must pay in order to receive non-angel investments can be prohibitive.
Dinehart officially started MoolaPitch in 2014, and says he has financed the company entirely on his own. Currently, it’s a two-man operation; Dienhart’s son, also named Stephen, is the company’s development director. MoolaPitch has also brought on independent contractors to assist, says the elder Dinehart. He says he plans to continue with his banking work at Madison, WI-based Heartland Business Transitions, and that MoolaPitch is part of his “menu of services to the business community.”
Indiegogo and Fundable are examples of crowdfunding portals that allow users to receive stock in businesses they invest in. The scope of those sites is much broader than that of MoolaPitch, which can only be used by Wisconsin-based investors who wish to fund Wisconsin-based companies.
Dinehart says that from the perspective of a startup headquartered in the Badger State, only being able to receive capital from local investors is “a major downside” to using MoolaPitch. But he adds that companies wanting to raise out-of-state money are likely to find that registering with national securities regulators tends to be more cumbersome and expensive than applying for Wisconsin’s intrastate program, which costs $50.
Wisconsin first enacted laws that allow for equity-based crowdfunding within the state in 2013. The maximum companies can raise is $2 million, and those raising more than $1 million must agree to be audited and share the result with investors. Those who meet national criteria for accredited investors or the state’s standards for “certified investors” can put as much money as they want into a crowdfunding campaign. Those who don’t meet one of those bars are limited to investing $10,000 in a single offering. On its website, MoolaPitch suggests that companies set a $500 minimum for investments.
One of the first Wisconsin-based portals to emerge and allow users to create funding campaigns was CraftFund, which focuses on the food and beverage industry.
There are currently three active offerings on MoolaPitch, Dinehart says: adBidtise, which works with clients to create marketing campaigns; LumosWifi, which helps small
