Thursday, June 23, 2016

Is Your Food Label “Naturally” Misleading?

What do the farmers’ market movement, non-GMO foods, and the Paleo diet have in common? All are aspects of a sweeping trend favoring healthy food products.

While health fads and trends have historically been fleeting (think “low-fat” everything in the 1990s), recent survey evidence suggests that rather than opting for fad diets, more and more consumers are committing to making healthier food choices in the long term. currently offers over 1,000 titles devoted to “clean eating.” Companies such as Blue ApronPlated, and Hello Fresh are emerging to offer consumers healthy ingredients and cooking instructions each week. New food services such as Origin Meals and Power Supply offer meal preparation and delivery services to meet consumer demands for sustainable, fresh, convenient, quality meals. And global sales of healthy food products are estimated to reach $1 trillion by 2017.

Monday, June 20, 2016

Crowdfunding Update: MNvest Goes Live Today!

Way back in October of 2014 I was writing about proposed legislation in Minnesota that (as in several other states) would legalize “equity crowdfunding” for intrastate offerings. While that legislation, cleverly branded as MNvest, actually became law during the 2015 legislative session, since then we have been waiting for final rulemaking by the Minnesota Department of Commerce.

Enacting these rules has taken long enough that in the interim the SEC has even managed to finalize, publish, and give effect to the federal crowdfunding rules (albeit more than three years after the deadline required under the JOBS Act). But wait no longer: The final rules under the MNvest crowdfunding law are live today!

At first blush, it might seem like Regulation CF (the federal rule) undermines the need for an intrastate exemption like MNvest. However, as regular readers know, Regulation CF has plenty of hoops to jump through. In the right situation, MNvest may be a better option for raising equity crowdfunding.

As is the case with raising capital under Regulation CF, there are plenty of requirements for a MNvest offering. These include regulatory filings. While I don’t plan to use this post to detail all of the MNvest requirements (you can read the final law and the final rules here if you’ve got nothing better to do—at least they don’t take up almost 700 pages like the Regulation CF adopting release), I’ve prepared this handy summary of some of the key differences between Regulation CF and MNvest.

Here are a few key MNvest requirements (which are not required under Regulation CF):

  • Your entity must be organized under Minnesota law (which eliminates all of the Delaware entities that have their principal operations in Minnesota —although I understand that there are legislative efforts underway to change this requirement).
  • Your business must have its principal office and 80% of its assets located in Minnesota.
  • Unless your business’s most recent annual gross revenue is under $5,000, you must have derived 80% of your gross revenue from operating a business in Minnesota.
  • Because this is an intrastate offering exemption, the offering, which must be conducted exclusively through a MNvest portal, must be made only to investors in Minnesota, and such investors will need to make certifications to that effect, in connection with their investment.
  • You are required to place proceeds in a third-party escrow until you raise your minimum offering.  You also need to provide a written explanation of how the minimum offering will be used.

And a few differences that may make MNvest a better choice (if you meet the above requirements):

  • You can raise up to $2 million in a MNvest offering v. a maximum of only $1 million in an offering under Regulation CF.
  • You don’t need your financial statements to be audited (or reviewed) by a CPA, unless you are raising greater than $1 million.
  • Maybe most importantly, unlike the relatively small limits on investment described in my prior post (which means the majority of the population can only invest an aggregate of $2,000 annually across all Regulation CF deals), each non-accredited investor in a MNvest offering is allowed to invest up to $10,000 in each MNvest offering.

One other important thing to keep in mind if you decide to raise equity through crowdfunding under MNvest instead of Regulation CF: Unlike the specific rules under the JOBS Act and Regulation CF that permit you (if you meet certain requirements) to exclude crowdfunding investors from your shareholder count in determining whether you need to become a public reporting company, there is no such relief in a MNvest offering. If you take on too many investors you may be forced to become a reporting company—a complicated and expensive proposition.

I continue to believe that there will be opportunities, particularly for consumer-facing businesses, to use both MNvest and Regulation CF. Time will tell if the burdens and costs outweigh the benefits to make them viable tools for raising early stage capital.

Wednesday, June 15, 2016

You Snooze, You Win

Did you get enough sleep last night?

Studies show that at least 40 percent of Americans are sleep deprived.  In Arianna Huffington’s new book, The Sleep Revolution: Transforming Your Life, One Night at a Time, she asserts that we are in the midst of a sleep deprivation crisis. As a leader in the sleep revolution crusade, Huffington proclaims that the key to a more productive, joyful life is simply getting more sleep.

After collapsing from sleep deprivation and breaking her cheekbone on her desk, Huffington set out on a journey to study the sleep deprivation crisis. In The Sleep Revolution, Huffington explores the important role sleep plays in our lives, including the latest scientific studies and the history behind our dismissal of sleep. The scientific findings she includes are fascinating and provide a thorough explanation as to why sleep is vital to your health, creativity, productivity, and capacity to lead.  

Thursday, June 9, 2016

What: Richard W. Moll, The Lure of the Law: Why People Become Lawyers, and What the Profession Does to Them (Penguin Books, 1991)

Why: A law degree is not a magic ticket to happiness (no surprise), but how you use it may be.

There’s something about the feel of a warm early-summer breeze as he contemplates a Canadian- fire-induced shimmering sunset that brings on a bout of navel-gazing in a lawyer approaching what should be his venerable years. Not that introspection is necessarily dependent on atmospheric conditions. After all, sociologists have long told us that lawyers, as a group, tend to be introverts. Some even go so far as to claim that this is a Good Thing.

Guilty as charged on the introversion thing, but as I look back, that’s not what led me to law school. My late father, whose advice over the years frequently pipes up at the back of my mind at opportune moments, would tell me that one could do almost anything with a law degree, a sort of general utility qualification for entrance into the professional classes. Dad was nothing if not practical, and I thought I detected a huge sigh of relief when I informed him that, when it came time to choose the fork in the road, I was turning toward law school and not graduate school in the liberal arts.

Thursday, June 2, 2016

Take Your Dog to Work Day 2016

In addition to being a lawyer who works with entrepreneurs, I own a retail business called St. Croix Saddlery. At the business, we have a unique but overwhelmingly popular greeter. Her name is Hufflepuff, and she’s a 12-pound Pomeranian ball of fluff (see above). She’s truly good for business, as I’ve seen customers’ buying moods shift from gloomy to gleeful with the wag of a tail, and parents always find more to buy if Hufflepuff entertains the kids! She’s also given us a boost on social media, with staff and customers regularly posting and pinning and tweeting selfies with her. As her owner, I love seeing the joy Hufflepuff brings and receives, but I also enjoy the added benefit and pleasure in being able to bring my dog to work with me.

Dogs can certainly be a positive addition to the right business, and I’m not the only person to recognize this, with dog-friendly work environments popping up everywhere, including Google and Replacements LTD.  At Ben & Jerry’s, in addition to getting three free pints of ice cream a day, you can also bring your pooch to the office.

Thursday, May 26, 2016

Entity Selection: LLCs and S-Corporations

A common question facing entrepreneurs is whether to organize their business as a limited liability company (“LLC”) or S-corporation (“S-corp”).  While there is no one-size-fits-all answer, in this post, I highlight some of the features of LLCs and S-corps, setting forth some factors that may influence your decision.

Both LLCs and S-corps are limited liability vehicles, meaning they protect an individual owner’s assets from creditors of the business.  
  • Both LLCs and S-corps are taxed as pass-through entities for federal income tax purposes, meaning there is no tax imposed on the entity, but that income and losses of the business are passed through to the owners.  That being said, some states do impose taxes on S-corps.

Thursday, May 19, 2016

Rotten Bananas: Prioritizing Customer Concerns and Creative Problem Solving

If you combine banana liqueur, rum, brown sugar, cinnamon, butter, glimmering flames, vanilla ice cream, and bananas, the end result is one of my favorite desserts—Bananas Foster. (My mouth is salivating even as I write this!) Those who have enjoyed this delicious treat have probably also experienced the crave-enhancing tableside preparation—the aroma of butter, brown sugar and cinnamon combined over an open flame, the scent enhanced by the addition of the banana liqueur, and, of course, the igniting of the rum for dramatic effect. 

I visited my favorite Bananas Foster establishment on a recent trip. Every time I visit this particular city, I go to this steakhouse for the Bananas Foster. It’s just that good. This trip, I meticulously planned when I would go, balancing out my schedule and other eating engagements to maximize my anticipated enjoyment of this decadent dessert.