Few Businesses Raising Funds Under New Crowdfunding Law

Wisconsin officials hoped to kickstart the economy by passing a law that allows businesses to attract investors through crowdfunding, but so far only three companies are using it to raise capital.

The crowdfunding law took effect last June. It allows companies to raise up to $1 million, or $2 million if they submit an audit. Patricia Struck, administrator for the Division of Securities within the Department of Financial Institutions, said one industry in particular seems drawn to the funding model.

“The one place where we’ve seen the most activity — and Wisconsin is not alone — its microbreweries, craft brewers,” Struck said.

So far use of crowdfunding is off to a slow start. There are two microbreweries and a theater project currently registered under the law.

Brian Hellmer, director of the University of Wisconsin-Madison School of Business’s Hawk Center for Applied Security Analysis, said entrepreneurs may not know about the law and traditional investors aren’t used to it.

“Its a chicken-and-egg problem,” he said. “The investors aren’t aware of it, which means it’s difficult for deals to get done. And if the entrepreneurs don’t see success in raising capital through this mechanism, they aren’t going to be very interested in it either. So it is going to take a little time to get success stories out there.”

Struck said the new method of raising capital is meant to reduce red tape.