Crowdfunding with mainvest for startups
It's a bit like crowdfunding platforms Kickstarter and Indiegogo, but instead of contributing money in exchange for an early version of a product, MainVest investors are actually lending money. They do so through a special kind of debt instrument that pays them back via a percentage of the business's revenue.
MainVest co-founder and CEO Nick Mathews hopes the idea will solve two problems. On one hand, small businesses have a harder time accessing capital than fast-growing tech startups, especially since banks have been more cautious about giving out commercial lines of credit in the wake of the recession. On the other hand, many people are locked out of investing in the most promising companies due to lack of knowledge or because they're not accredited investors.
MainVest aims to bring the two sides together, providing investors with a pool of opportunities and businesses with a suite of tools to help them corral a herd of investors and handle all the necessary regulatory paperwork.
This type of online fundraising was made possible by the federal JOBS Act in 2012. The U.S. Securities and Exchange Commission put final regulations into place in 2016.
“It allows people to actually vote with their wallets and really have a say in shaping their communities,” Mathews said. “Businesses are going to have local allies and local evangelists, and they’ll have a competitive advantage in the market.”
Mathews, who incorporated MainVest this spring along with co-founder Ben Blieden, was previously an early Uber employee and helped launch the ride-hailing service in the Northeast.
“That first three years at Uber, our mission and our belief was really around economic empowerment” for drivers, Mathews said. In his view, that mission faded as the company grew, but he began to look for new ways to support independent business owners.
Mathews said MainVest has been working with economic development agencies in multiple cities to identify businesses that might be interested in the site, which takes a 6 percent cut of successful fundraising campaigns.
When MainVest launches this fall, it will have between 10 and 30 profiles for businesses in the Greater Boston area, Mathews said. One of them will likely be Wears Woody, a Cape Cod-born beachwear retailer that wants to raise money for its first brick-and-mortar location.
Wears Woody founder Mike Norwood said he's always taken an unconventional approach to growing the company, which started off selling flip-flops and sunglasses to beachgoers out of the back of a station wagon named Woody. He sees MainVest as a way to raise outside funding for the first time while still remaining true to Wears Woody's loyal customer base.
“We want to make stuff differently, we want to market it differently, and sell it differently," Norwood said. " I see MainVest as a vehicle for us to be able to legitimately and with structure fundraise and galvanize a community for us that we know exists."
The retailer also donates 25 percent of its profits to diabetes-related nonprofits, and Norwood hopes people from that community will contribute to the funding as well. Wears Woody will likely try to raise enough money to build out a physical location somewhere in Greater Boston that combines a retail shop with a lounge-style space for customers and an inventory warehouse
Cox Business News staff Writer
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