As retail rents rise ever-higher, a crowdfunding company is looking for ways to turn small-dollar investments into equity in small neighborhood businesses.

A four-year-old tweak to financial regulations designed to pair up small investors and startups is taking on new significance in the COVID-19 era as a potential life preserver for Main Street businesses. 

The recent ability for people to invest as little as $100 in companies factors into the future prospects for bakers, brewers and bodegas from New England to Silicon Valley raising money through MainVest, a Salem-based crowdfunding platform. In a continuing drama that has highlighted the steady loss of local landmarks, the platform has collected nearly $200,000 to try to preserve 44-year-old Allston music hall Great Scott. 

“One of the largest silver linings of COVID is the importance of local economies and small businesses, and the sense that you don’t know what you’ve got until it’s gone,” MainVest CEO Nick Mathews said. “Our job is to take this and remind people there are great solutions.” 

The Allston live music venue is losing the lease for its longtime Commonwealth Avenue home, as landlord Oak Hill Properties indicated that it is close to an agreement with an undisclosed new ground-floor tenant. 

Club booking agent Carl Lavin had tentatively reached an agreement to buy the liquor license and club equipment from Great Scott’s owner and launched the crowdfunding campaign on May 26, Mathews said. A last-ditch effort by Lavin appears to have fallen short, as an attorney for Oak Hill Properties notified him in late June that the owners have signed a letter of intent with another tenant.  

Lavin is exploring other options for keeping the Great Scott brand alive, Matthews said. In the meantime, the investments are being held in an escrow account since the fundraising campaign is still open, and will be refunded barring a last-minute reversal of the landlord’s stands, he said. 

Lavin was not available for comment but in an online post June 25, he said he’s looking at other options for Great Scott’s future. 

“The deal that Oak Hill is intending to move forward with is not yet final. Where there’s light, there’s hope and if in the event that the situation changes on their end we’ll be ready,” he wrote. 

How It Works 

Investors in SEC-approved crowdfunding platforms such as MainVest buy securities with an agreed-upon investment multiple, and the business agrees to pay back a portion of its revenues over a set period of time, typically around five years, Mathews said. 

In Great Scott’s case, the 1.3 investment multiple means that those who invest the minimum $100 would receive payments totaling $130 by 2027. More than 500 people invested a total of nearly $200,000 in the campaign, which runs through late August. 

Previous campaigns have raised as much as $400,000 toward business expansion, in the case of an upstate New York pizzeria. 

As bans on gatherings affected retail and restaurants began in March, threatening the livelihoods of countless small business owners across the nation, more than 30 new clients have joined MainVest, Mathews said. Fundraising declined during the initial stages of the pandemic but rose 200 percent from April to May and another 150 percent in June, he said. 

A New Investing Option for the Masses 

Until recently, only accredited investors with annual income topping $200,000 and net worth of $1 million could participate in securities-based crowdfunding offerings. 

Under the revised federal rules that took effect in June 2016, investors with annual income of net worth below $107,000 can invest up to $2,200 or 5 percent of the lesser of their net worth or income during any 12-month period. Those with annual incomes and net worth above $107,000 can invest up to 10 percent of their annual income or net worth, whichever is less, to a maximum of $107,000. 

Mathews, a former Uber executive, founded MainVest to provide a new source of capital for small businesses, particularly those brick-and-mortar retailers feeling pressure from e-commerce and rising rents. COVID-19 compounded the threat to locally-owned businesses. 

In Dorchester, a bakery startup that’s built a growing catering and special events business is on the verge of signing a lease for its first dedicated space after raising $40,000 through MainVest. 

Heather Yunger left her job at an LED lighting startup to hone her baking skills before launching her own catering business, Top Shelf Cookies, in 2014. The company has a growing online business and delivers its products to office buildings and colleges. 

Steve Adams

After using shared space at CommonWealth Kitchen in Dorchester, Younger sought a dedicated manufacturing and retail space to provide more flexibility and capacity for the holiday rush which comprises 35 percent of her annual revenues. The funds will be dedicated toward equipment purchases, buildout of the space and additional capacity for new products, she said. 

While Yunger explored small business loans, she said MainVest’s focus on independent businesses resonated in a city where rising real estate values are robbing neighborhoods of local flavor.  

“We have a city full of amazing entrepreneurs, but the cost is so high to do business here. We have the same few chains and it’s kind of disappointing,” she said.