Guest post by Robert Benjamin of Member’s Media.
With the recent passage of Oregon’s interstate crowdfunding administrative rules allowing small and startup businesses to extend investment offers to local non-accredited investors, there has been a lot of emphasis put on the participating entrepreneurs and the new pool of potential investors. Rightfully so, as the historic rules allow what has essentially been prohibited or very expensive to do for over 80 years. Private companies of a certain size, doing a majority of their business in Oregon can now easily offer securities to instate residents.
There is great potential to increase the amount of available capital to start or expand businesses. There is also the opportunity to keep a large amount of capital circulating within the state, and for “average” people to become stakeholders in small and early stage business.
There is another population that has been talked about far less but whose engagement is needed to make this new investment economy work. They are the independent business support community; marketers, branding experts, strategists, structural attorneys, designers, web developers, etc. Why? The most obvious reason is that more business development activity creates more demand for business support services. Websites will need to be built, marketing plans launched, businesses properly structured and so forth.
Right now a select few non-profits (like Hatch) and SBA’s have taken on the early burden of providing services and creating educational materials for both entrepreneurs and this new class of investors. While this is sorely needed, there is a limited amount of resources that they will be able to provide. This will ultimately lead to a bottleneck and slower adoption. Unless, independent for profit service providers become engaged by creating tailored service packages for community capital pioneers.
Some might argue that for profit service providers will add a layer of cost and complexity to the process. Is that actually a bad thing? One reason that experienced service providers must engage in the process is because the bar to create an investment offering is so low. Just about any entrepreneur can create the paperwork, pass is through their local SBA, and with a very low fee, start selling intrastate securities. This means that there will inevitably be both experienced as well as novice business owners taking on investments. In addition, there will be both sound business plans as well as ones that are missing key elements. For many of these business owners even the actual offer will be a completely new and foreign financial product. All the more reason for offering businesses to find and engage the most experienced service providers. This will dramatically increase the chances for both a successful raise as well as a successful business operation after that goes on to fulfill the additional investor obligations they take on.
There is no question that potential investors are more than capable of learning whatever information they need to make an informed decision before investing in any business. The new rule already minimizes the impact of potential individual investor loss by providing a low investment cap. The extra step businesses take by engaging service providers will increase their chances of success. In addition, retaining qualified counsel and services will go a long way to demonstrating to any would be investors that the due diligence and preparation was done on part of the entrepreneur before they even made an offer.
Robert Benjamin is writer, entrepreneur, and balanced ownership advocate. He is the founder of Member’s Media Ltd. Cooperative, a member owned narrative content accelerator. He is also the Co-founder of MUNITIO, a lifestyle electronics accessory brand. He has established and led brands through all stages of start up including structuring, securing financing, product launches, and successful exits for investors. He provides narrative branding, creative financing, and ownership strategy consultation for start-up businesses of all sizes and disciplines.
Areas of expertise:
Narrative based branding and marketing
Product development and launches
Creative organizational structuring