GRAND RAPIDS — A group of venture capitalists, entrepreneurs and investment bankers has launched RelayFund Inc., the first equity-based ‘crowdfunding’ Web site started in Michigan and one of the first in the nation that will link small investors with startup operators under the provisions of the new federal JOBS (Jumpstart Our Business Startups) Act.
RelayFund is the creation of investment banking firm Hartwick Capital and investor relations firm Lambert, Edwards & Associates. Both are based in Grand Rapids. And officials with both firms say they view crowdfunding for equity as the next major catalyst in transforming the capital markets and connecting everyday Americans with private equity.
Crowdfunding — or money raised online for charities, projects or pre-selling products or services — has quickly emerged as an estimated billion dollar market worldwide, yet this is expected to pale in comparison to the potential created by new legislation allowing crowdfunding for capital. The bipartisan JOBS Act — passed by Congress and signed by President Obama in April 2012 — allows online micro-investments for startup businesses and creates a platform for private equity for the masses.
“There is a generation of Americans that has witnessed the power of the Internet to connect and empower people, yet seen little of this applied to capital formation,” said Jeff Lambert, a principal in RelayFund and president of Lambert, Edwards & Associates. “Crowdfunding bridges the void between Wall Street and Main Street. It will be a catalyst for small business growth, fuel to create hundreds of thousands of jobs, and the spark for middle-America investors to participate in private equity.”
Private equity and venture capital has been previously accessible only to Wall Street, large institutions and corporations, and high net worth investors and restricted to all others due to state and federal securities regulations. The same restrictions applied to crowdfunding to raise equity until the JOBS Act legislation was passed.
RelayFund is leading the transition from crowdfunding as a tool for giving or trading to crowdfunding capital (debt and equity), and intends to build the leading online community focused on connecting entrepreneurs and ideas with capital. RelayFund, founded in December 2011 at the onset of the crowdfunding legislation, is based in Detroit and has a development and operations team in Grand Rapids.
“Correctly implemented, the JOBS Act is a common-sense mechanism to give investors equal access to private equity and the financial markets, while simultaneously helping them invest responsibly,” said Phil Blachard, a principal in RelayFund and co-founder of Hartwick Capital. “We know the equity crowdfunding space will quickly become littered with opportunists trying to enter the market, but we believe the sites that prosper will have capital markets expertise and a focus on providing resources to both the entrepreneurs and investors to take a long-term view, which is the hallmark of good investing.”
Rulemaking by the Securities and Exchange Commission to support the JOBS Act is currently under way and the crowdfunding legislation is expected to be fully implemented by early 2013. RelayFund officials said the Web site is in beta testing and expected to go live later this year to coincide with the SEC’s completed review.
More at www.relayfund.com.