Jeff Moriarty had a dream of producing quality beers in his own St. Paul brewery.
 
But the capital expenses for such a facility are high and banks—especially in today’s more cautious environment—are loath to take too many risks.
 
That left Moriarty with few options. Under current law, he was unable to reach out to anyone but friends and family to invest in his company. It ended up taking a year and half before he and his friends had enough capital open Tin Whiskers Brewing Company in St. Paul’s Lowertown neighborhood.
 
“It was incredibly frustrating to be unable to reach out outside my network,” Moriarty said. “Why shouldn’t other folks in the local community have access to investment?”
 
The federal government made changes several years ago to Great Depression-era legislation that granted “accredited investors” the ability to invest in small organizations. But that put a burden on startups that had to verify investors’ finances and required them to forego seeking money from family and friends.
 

A new, bipartisan proposal working its way through the Minnesota legislature this session attempts to fix that by enabling equity crowdfunding in the state for unaccredited investors, being promoted by an organization known as MNvest.
 
MNvest says the idea would provide “wider, cheaper and faster access to seed funding for entrepreneurs.” Think of it like KickStarter, but for equity investments rather than a trinket.
 
“We think there are a lot of Minnesotans that want to invest in the next great company,” said Ryan Schildkraut, a lawyer at Winthrop & Weinstine and the muscle behind MNvest. “But right now it’s illegal for them do so.”
 
Schildkraut says the law would make investing easier in two ways. First, by making it legal to advertise investment opportunities to the public. Right now, only accredited investors—those who certify with the U.S. Securities and Exchange Commission that they’re high-income, high-asset individuals—can make an equity investment in a company if they don’t know the person seeking the money. Second, it establishes the rules around state-registered portals that can connect potential investors with companies seeking an infusion of cash.
 
“The internet has brought down a lot of walls,” he said. “This is the last one.”
 
The bill hasn’t been without concerns. In late January, Minnesota Department of Commerce commissioner Mike Rothamn sent a letter to Sen. Terri Bonoff, a sponsor of the legislation. “As currently drafted, the Commerce Department cannot support this legislation,” he wrote. “I am seriously concerned that Minnesota investors may unknowingly be faced with financial risks and costs without proper disclosure of, among other issues, burdens and limitations.”
 
The two sides met for several weeks and altered the legislation to provide additional protections. In an email to TCB, Commissioner Rothman said that “nearly all” of the department’s concerns had been addressed.
 
As it currently stands, the legislation provides consumer protections such as limiting investments to $10,000, requiring documents filed with the state and keeping the funds in an escrow account until an adequate amount has been raised.
 
The bill passed all House and Senate committee hearings and is now in both chambers’ omnibus spending bills. MNvest organizers say they’re “optimistic” of its chances.
 
“It’s on the one-yard line,” Schildkraut said.
 
Though Tin Whiskers didn’t get a shot at reaching out to the community for investments last time around, the legislation may benefit them in the future: The company is expanding its brewing capacity and has longer-term plans to build a production-only facility somewhere in St. Paul.
 
“Most of our current investors are probably tapped out,” Moriarty said. “So we’ll definitely be looking for folks who want to invest in us and the community.”