Investment Crowdfunding for Wineries. February 17, 2017

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1 Investment Crowdfunding for Wineries February 17, 2017

2 A Little Bit About Me 2 Zach Robins zrobins@winthrop.com Twitter: zjrobins LinkedIn:

3 Winthrop & Weinstine 3 Representing over 75 breweries, wineries, cideries, and distilleries Entity Formation State Licensing & Other Regulatory Raising Capital (Traditional & Crowdfunding) Trademark Protection & Brand Management Distribution Agreements Mergers & Acquisitions Follow Us on

4 Investment Crowdfunding 4

5 Congress Responds JOBS Act 5 As part of the JOBS Act of 2012, Congress directed the SEC to develop new rules that would make it easier for companies to raise capital from investors. 5

6 JOBS Act: Key Components 6 Advertising in Connection with Sales to Accredited Investors Regulation Crowdfunding Reg A+ Mini-IPOs Title II Title III Title IV Also called Rule 506(c) Became effective in October 2013 Growing in popularity Went into effect on May 16, 2016 SEC released final rules in March Became effective in June 2015 Not very useful for small businesses 6

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8 Title III: Regulation Crowdfunding 8 Issuer Offering Limit: $1 million in 12 months Investor Limits: If annual income/net worth < $100,000, limit is greater of $2,000 or 5% of the lesser of annual income/net worth If annual income/net worth $100,000, limit is lesser of $100,000 or 10% of the lesser of annual income/net worth 8

9 Title III: Regulation Crowdfunding 9 Funding Portals: Companies must sell through a portal Registered with the SEC and FINRA Handles funds for the company Posts company disclosure information 9

10 Title III: Regulation Crowdfunding 10 Company Requirements: Disclosure document, including MD&A discussion and annual reporting Issuers will be required to file Form C prior to commencement of the offering, during the offering if material changes occur, annually after the offering, and at the conclusion of their reporting obligations. 10

11 Title III: Regulation Crowdfunding 11 Financial information for two previous years: -- tax return/financials $100, reviewed financials $500, audited financials > $500,000 (except first time reviewed financials) 11

12 Title III: Regulation Crowdfunding 12 Certain advertising restrictions do apply (see Rule 204) Reg CF offerings will not be integrated with other offerings Restrictions on transfer exist within the first year of purchase (except limited circumstances) 12

13 13 MNvest Intrastate Investment Crowdfunding

14 Intrastate Crowdfunding 14 Frustrated by the SEC s inability to design a useable system, individual states have adopted their own Crowdfunding laws, which permit offerings between an issuer and residents residing within the same state.

15 15 Only available to Minnesota-based companies. All investors must be Minnesota residents. Offerings can either be (a) exempt MNvest offerings; or (b) registered SCOR offerings. Offerings must be made online through a MNvest Portal registered with the Minnesota Department of Commerce. Issuers may create their own portal or work with a third-party host platform.

16 MNvest: Features 16 Non-accredited investors subject to $10,000 investment cap Companies subject to $2,000,000 cap per offering Companies must provide detailed disclosure documents Funds must be held in escrow until funding target is reached MNvest Portals subject to stringent recordkeeping requirements and general oversight by the Minnesota Department of Commerce Statute: MN 80a.461 and Dept. of Commerce Rules

17 MNvest: Changes 17

18 MNvest: Template Docs 18

19 Two MNvest Tracks 19 MNVest Exemption MNVest SCOR Track Offering Limit Eligible Investor s Track $2M (or $1M w/o reviewed financials) MN residents only $5M MN residents + residents of other states if *replaced with residency the offering test is

20 MNvest: Players 20 Developers Issuers Attorneys / CPAs Banks Investors Portals

21 Planning For Your Offering 21

22 Planning For Your Offering 22

23 Planning For Your Offering 23

24 Planning For Your Offering 24

25 Parting Thoughts 25 I. Companies can now sell ownership of their business via approved funding portals. 1. Previously, crowdfunding was limited to rewards-bases services like Kickstarter. II. For the first time in 80 years, 100% of the population can invest in public offerings of private companies. 2. Previously limited to the rich. III. Fundraising will be easier with use of the internet but not easy. 3. Substantial regulations exist dictating how much can be raised from each investor. IV. This new opportunity puts even more pressure on companies to be able to tell their story. 4. Business planning is paramount! 25

26 Parting Thoughts Competition will be fierce. You must be able to set yourself apart from competing offerings. Consider mixing rewards in addition to ownership. 2. Investors may be able to get on the ground floor of the leading companies of tomorrow. But this is not without risk. Many will fail! 3. Your success (or failure) in raising capital will be public. So plan accordingly and build the right team of management and advisors (such as lawyers, accountants and marketing) to help you succeed. 26

27 27 Questions? Zach - zrobins@winthrop.com