UNTAPPED POTENTIAL For the first time, businesses and entrepreneurs may solicit online for investors.

The landscape for generating money for startups and expansions has dramatically changed – and potentially for the better.

BREWING UP BUSINESS

The landscape for generating money for startups and expansions has dramatically changed – and potentially for the better.

BREWING UP BUSINESS

When the federal government eased the rules for businesses seeking investors on Sept. 23, it eliminated a ban on general solicitation online for companies and entrepreneurs trying to raise capital.

Since the Securities and Exchange Commission lifted the ban on general solicitation online in Sept. 23, one Allentown firm’s project could benefit from a wider pool of potential investors.

Businesses looking to solicit funds from any investor via the Internet now can do so, thanks to the second provision of the federal Jumpstart Our Jobs Act, which became legal Sept. 23.

ForeFund Capital, a marketing company headquartered in Venice Beach, Calif., is advertising the Allentown Ruckus Brewing project to investors on its website, putting a Lehigh Valley redevelopment site on the map. The site is at 451-401 N. Front St. and 16 W. Liberty St., overlooking the Lehigh River.

This expanded network of potential investors could be a blessing for businesses and startups. The law applies to most industries, but commercial real estate ventures, in particular, could benefit from the change.

New York City-based Ruckus Brewing plans to buy the 4.6-acre property – the former Neuweiler Brewing Co. site – from the Allentown Commercial and Industrial Development Authority for $1.7 million. The company entered into an agreement of sale to buy the entire property but has not closed on the deal, said Scott Unger, executive director of the authority.

Before Sept. 23, businesses had limitations on how they could seek investors.

Brewers Hill Development Group LP, a separate entity of Ruckus, will buy the property, Unger said. The authority is scheduled to close on the property on Dec. 15, Unger said.

“If you were making an offer or trying to raise capital, you could only let investors know through a broker/dealer or manager making the connection for you as a company to an investor,” said Carol Oscarson, agency director for Leverage PR, an Austin, Texas firm that represents Crowdfund Intermediary Regulatory Advocates, an organization formed by the crowdfunding industry’s leading platforms and experts.

“We are in the midst of a remediation project,” Unger said. The authority did a considerable amount of work to get the property in marketable condition in conjunction with the city of Allentown, he said.

However, with a lifting of the ban on general solicitation, a hedge fund company or investment bank can now go online, use LinkedIn, Twitter, Facebook, etc. and advertise the deal in that manner.

Ruckus Brewing Co. is investing $30 million in the project, called Brewers Hill, said Piero Lamagna, director of operations for Ruckus. The company plans to convert the building into a working brewery for its brand but also offer space for contract brewing for other brewers. The building would also include office space, a business incubator and a brew pub and restaurant, Lamagna said.

“It does change the game but so far, [primarily] only startups have taken advantage of the lifting of the ban on general solicitation,” Oscarson said.

“It’s slated to launch in late 2014; the building has been derelict for 60 years,” Lamagna said.

Experts say crowdfunding, the act of soliciting funds from the public – usually via the Internet – got a boost when the government eliminated the ban on general solicitation.

With a project of this scope, completion dates and plans are subject to change.

“They lifted the long-standing ban on advertising [online] for any potential investors,” said Wayne Barz, manager of entrepreneurial services for Ben Franklin Technology Partners of Northeast Pennsylvania, an agency that helps technology startups find funding. “They [businesses] never could really advertise at all before, to wealthy or otherwise. And they can now advertise to virtually anyone…wealthy or not. …

Allentown has 128 acres throughout the city that are designated as a Neighborhood Improvement Zone, including this property. Under the NIZ, certain state and local tax revenues generated by new businesses in the zone can be used to pay debt service on loans that fund qualified capital improvements within the district.

Brian Pedersen
Reporter Brian Pedersen covers construction, development, warehousing and real estate and keeps you up to date on the changing landscape of our community. He can be reached at brianp@lvb.com or 610-807-9619, ext. 4108.

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