More than $2.7 billion in venture capital flowed into Massachusetts in the first quarter, according to the latest PriceWaterhouseCoopers survey. Yet pretty much none of that went to the kind of local businesses that anchor neighborhoods—the restaurants, cafes, yoga studios and breweries.
Fortunately, those mom & pops have another option, thanks to Mainvest, an investment crowdfunding platform that launched last fall. In a crowdfunding landscape cluttered with tech startups and token offerings, Mainvest stands out for its focus on hyperlocal brick & mortar businesses in the greater Boston area—with the emphasis on greater. Most of the businesses to date have been in sleepy, non-tech centers such as Brighton, Lowell, Lynn and Salem, where Mainvest is based.
“We want to give people an opportunity to invest in their backyard,” says Ben Blieden, Mainvest’s cofounder and CFO (pictured, second from left, with Mainvest team and, at center, the mayor of Salem).
Given its Main Street clientele, Mainvest has focused so far on revenue-sharing deals, which are generally less risky and less complicated than equity for businesses as well as their investors.
Mainvest was founded by Blieden and Nick Mathews (pictured on far left), who met while students at University of Massachusetts Amherst. Mathews went on to work at Uber, spending seven years there helping to launch the ride-sharing service in New England. That gave him insights into operating two-sided marketplaces and the art of balancing supply and demand. Blieden worked in finance, valuing small businesses and creating debt and equity instruments.
When Regulation Crowdfunding went live in May 2016, the two saw an opportunity to launch a crowdfunding portal focused on local businesses, rather than tech startups. “It’s easy for good startups to get capital, they don’t have to risk a lot,” says Blieden. Small businesses, on the other hand, do, he said. He and Mathews thought crowdfunding could help mitigate that risk.
How? For one, crowdfunding can validate an idea and show that a business is something that people want. As Blieden points out, when new businesses fail, “often, it turns out that no one wanted it.”
A second way crowdfunding helps lessen risk is via social validation. “To get people you know, whether existing customers or others in your network, to put money towards something says a lot about you as a business person,” he says.
Finally, there is the alignment of interest between customer-investors and the business. “What happens to a coffee shop when you have 200 people getting a dollar for dollar return via revenue sharing? What happens when 200 people realize that their returns are dependent upon that coffee shop’s ability to generate revenue?” asks Blieden. It’s still early, he acknowledges. And the first couple of funded Mainvest businesses are just preparing to pay investors back. But, he believes “they won’t be going to Starbucks.”
To date, six businesses have been fully funded on Mainvest—such as the Nightshade Noodle Bar in Lynn, which brings a Vietnamese-influenced café to a neighborhood in sore need of options; a sustainable beauty salon in Holyoke; and Chez Casa, a quick-serve café and deli in Salem. Another handful of business have active campaigns. Mainvest charges a flat 6% fee to issuers. There are no charges for investors.
All of the offerings so far have been for Mass.-based businesses, in Mainvest’s own backyard. But Blieden says the portal is looking to expand beyond its home state. It also recently debuted the first investment campaign offering a SAFE (simple agreement for future equity), for a cannabis brand called Wicked Frosty Farms.
Mainvest At a Glance
Based: Salem, Mass.
Focus: Local brick & mortar businesses
Funding Types: revenue sharing, but open to other types
Fees: 6% fee for issuers
Notable: Mainvest offers a place for residents to propose and vote on businesses they’d like to see in their neighborhoods
Mainvest is also trying something a little different. One of the key benefits of crowdfunding is that it can help communities fill gaps in the local market—for, say, a bookstore or a music venue or just a good local brew.
To that end, the portal offers a petition feature, where community members can suggest businesses that they’d like to see in their neighborhood, and others can vote on it. That gives would-be entrepreneurs a window into what the community desires. A petition for an organic grocery store in Salem attracted 63 signatures and 30 comments.
For the most popular petitions, MainVest will contact local politicians, work with economic development organizations and seek out entrepreneurs to address the community need.
That approach has resonated with local officials. “I like the concept of people in the community being able to impact a business, especially a small business where they live,” Mayor Kim Driscoll (pictured in middle, at top), told The Salem News.