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Hosemann to launch crowd funding program

Delbert Hosemann

Delbert Hosemann


Crowd funding has been around for a few years.

Sometimes it’s a shop that’s about to go under. Someone sends out the rallying cry and the money pours in, sometimes.

And maybe there is a lasting benefit, maybe not.

But the phenomenon has become more varied. And in some cases more sophisticated, with a longer-range perspective.

By using a “crowd” — of often nontraditional investors — to raise capital.

Mississippi Secretary of State Delbert Hosemann said he got tired of waiting for the U.S. Securities and Exchange Commission to issue rules for crowd funding, or Internet financing, for the JOBS Act, so he decided to use his statutory authority and create a vehicle for it, designed for Mississippians.

That will become a reality in about a month, he said in an interview.

Congress passed the JOBS (Jump Start Our Business Startups) Act in April 2012, but the SEC will not issue rules till October, three and one-half years after President Barack Obama signed the bipartisan legislation.

Hosemann, who is seeking his third term, said that the Dodd-Frank Act, which tightened lending standards after the 2008 near-meltdown of the nation’s financial sector, has made it more difficult to obtain capital for those who cannot use the usual channels.

“Mississippi is a capital poor state . . . particularly small businesses,” Hosemann said. “We have this gap between somebody having an idea and the [ability] to start a business.”

The Secretary of State’s office will hold a seminar on starting a business in that way on April 29 from 11:30 a.m. till 1 p.m. at the Muse Center at Hinds Community College in Pearl.

The framework allows for someone to go online and form a limited liability corporation. A form asks for personal information, including whether the applicant has ever been convicted of a felony, a business plan, financial data.

After receiving the application for the LLC, the office will reply within five business days. “This is a very fast turnaround,” Hosemann said.

After confirmation that the application has been filled out correctly, the would-be entrepreneur will be able to ask for funding anywhere in the world, Hosemann said.

Next an escrow account must be opened with a Mississippi bank, he continued. At least 50 percent of the targeted amount must be placed in the account before any money will be released, Hosemann explained.

If 50 percent of the targeted amount is not reached within a year, all money will be returned to investors.

Limits will be put in place. For an investor whose net worth is $1 million, the limit is up to 5 percent of that amount. If the investor’s net worth is between $1 million and $5 million, he or she may put up to 10 percent of that amount. If a person’s net worth excess $5 million, investment is unlimited, he said.

Mississippi securities laws require that at least 80 percent of the revenue must be used in the state and 80 percent of the assets must be located in Mississippi, Hosemann said.

“This is to start Mississippi companies. It’s not to start one in Massachusetts.”

“We think this will be particularly popular in our college towns. You have this intellectual capital buildup, either from professors or from students. I think you’ll see them have the opportunity to test the waters.”

Hosemann said that when he was a young lawyer, he was also a builder. But the first time he went to the bank and asked for 100 percent financing, all he got from the banker was a blank look.

Ashby Foote, chief investment officer for Vector Money Management in Ridgeland, served on a study group that examined the concept.

The approach will lend itself to small projects “that wouldn’t lend themselves to bank financing just because they are more on the intellectual side and not on the hard-asset side,” said Foote, who is city councilman for Ward 1 in Jackson.

“I think it’s great that Mississippi is going to put some rules in effect to try to facilitate this. We’ll see if the investors line up and fund some startups.”


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About Jack Weatherly


  1. Geraldine Cherry

    I would like to attend the Seminar. Do I need to sign up for the seminar?

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