Crowdfunding site targets Jan. launch
RelayFund Inc., a new Michigan-based crowdfunding site, is revving up to help connect small investors with startups.
Crowdfunding combines social media with raising private equity for small businesses -- similar to microloans and project startup funds raised on sites like Kiva.org or Kickstarter.com. It was created after President Barack Obama signed the Jumpstart Our Business Startups Act in April.
"Before the legislation, there was no good way for small businesses to raise capital beyond asking family and friends," said Jeff Lambert, one of RelayFund's principals and president of Troy-based investor relations firm Lambert, Edwards and Associates. "A lot of rules were put into place to help protect investors from fraud, but it's stunted the job market by making it hard for startups to take off."
RelayFund is backed by Lambert's firm, as well as Grand Rapids-based investment banking firm Hartwick Capital and a handful of investors across the state. The site can be found at www.relayfund.com, but it's not yet active.
Lambert and his partners are preparing for a January launch, when the Securities and Exchange Commission will likely release regulations.
"Everyone is trying to predict how the SEC will structure this," Lambert said. "But with enough freedom, I think it'll be a real job creator and fill the gap that exists in private equity now."
The maximum businesses can raise is $1 million a year. People with incomes below $100,000 can invest up to $2,000, or 5 percent of their annual income. Those with incomes higher than $100,000 can invest 10 percent of their annual income, with a maximum total investment of $100,000 per year.
Ken Kousky, a partner in RelayFund and founder of Midland-based BlueWater Angels Investment Network, said that crowdsourcing democratizes the investment process, allowing small-time investors to have greater control with their money.
"Traditionally, what the Internet does is take away the bureaucratic middle management and transactional services," he said. "Crowdfunding looks like it's a radical change, and it is -- it's all about taking Wall Street finances back to Main Street."