Why Does SMNW only do Accredited Investor Only meetings?

To date Slow Money NW has been one of the most sure successful regional chapters in the national Slow Money efforts. Part of that success is because we have have tried to ensure that our efforts were legal and targeted towards what businesses and investors said they needed. Since opening its doors our  in 2010, we have provided business development assistance to 40 WA and OR based businesses and successfully helped 7 businesses secure investments of  about $5  million. We now have a track record that is attracting financial contributions to do more work, but not yet enough to do all that we want to do.

Gearing up for another accredited investor meeting is always fun and challenging because on the one hand we are directly connecting investors with businesses, and on the other hand excluding people who are not accredited investors. The fun and excitement comes from knowing that good people have good businesses worth hearing, and that good people want to help and invest in good businesses working to grow our regional food economy.

There are two federal legal restrictions on public access to private business investment opportunities: that investors be aware of the risks and resilient to the potential losses; and that we only invite investors with whom we have an existing relationship.

First, accred-only events are exclusionary. The SEC has a clear definition of who is, and therefore who is not, an accredited investor. The quick and simplified reason for these classifications basically dates back to the 1920’s when ‘snake oil’ salesman sold uninformed investors items that sounded really good but cost people their life savings, their retirement, their homes. Rules were set in place during the Depression to make sure that people who invested directly in private businesses (compared to public stock exchange listed companies and mutual funds) understood the risks and could afford to make them. Second, violations of these restrictions include public announcement of the investment opportunities, such as posting the details of the companies presenting on our web site. This is why you do not see our current presentation meetings on our website, and why it is only seen through our direct email invitation. For more information about who may receive invitations and attend events, please contact us directly.

For those that do not meet the SEC definition above, and do not have an existing relationship with Slow Money NW, and want to help transform the regional food system, see our post Beyond Accredited Investor Options on ways that you can get involved. Thanks for your patience as we build out what we have started and continue to create innovative, safe, and legal opportunities for people to connect to the businesses we all want to grow.

Beyond Accredited Investor Options

As we work to balance our limited resources and the regulatory maze for connecting investors and businesses we wanted to list a few of the options that are present and emerging.

The recent JOBS Act has proposed making it easier to to crowdfund investments, and hopefully those rules will come out next year. But don’t hold your breath too long since this means that government has to successfully regulate snake oil salesmen, and the agency charged with doing so, The Financial Industry Regulatory Authority, or FINRA, does not really want to; would you? At least there is progress towards this need, but some reports suggest it may become more complicated.

There are basically four structures out there that do allow some pooling of ‘investors’ and friends to build relationships and figure out how to align investments and donations. 

Investment Clubs are a structure that the SEC recognizes. Any one can participate to learn how to invest and sometimes pool funds towards investments. SMNW wants to build out one or a series of investment clubs in the region. We feel the best way is to help organize people in to groups around topics they want to explore. What is needed are funds to hire someone to organize these efforts; or some Uber Volunteer who wants to work with SMNW to take on this idea. We have 1,000 people on our listserv that would love to know more. If you are interested in helping these efforts please let us know!

Direct Public Offerings, or DPOs, allow businesses a limited but more direct raise from any investor(s). A previous presenter Farm Power raised funds in WA and OR this way via the related SCOR offering structure.  There are current efforts to highlight DPOs as a key vehicle in the growth of regional economies, with Jenny Kassan of Cutting Edge Capital helping lead the way. Portland’s Springboard Innovations is coordinating the launch of ChangeXChangeNW, one of the first attempts to create a local stock exchange. They have a Nov 7th forum in Portland for more information.

A Local Investment Opportunity Network is an innovative structure first developed in Port Townsend, WA. LIONs are catching on around the country because they make sense and people want to do more of them. Just search on the term to see the growth of this idea. The trick is that the SEC has not yet reviewed them as legal and safe, but they are now paying attention and auditing at least one network to determine if what they are doing is safe and legal. I will hold my breath on this one as this could set a precedent for how FINRA structures crowdfunding regs.

Online crowdfunding sites like Kickstarter and Indiegogo are great as contribution vehicles. While they are not technically an investment they have helped various businesses raise significant capital.

Slow Money is in the process of rolling out two innovations focused specifically on food and farming. The Soil Trust is just coming online and is working to aggregate donations for use in investments. Look for more info as this really comes online. A new kid on the block is Credibles, also connected to Slow Money, that uses prepayments of goods instead of contributions; basically a gift card model to have people prepurchase product and get more back than they submitted. For example, if you prepay for product from a business with $500 you will get maybe $550 of product. In Seattle this is how Rover’s funded it restaurant expansion, but without a standardized website. If you are interested in this please let us know as we are looking for a group of companies in our neighborhoods who may want to use this model.