Opening up a pie shop is hard enough. Throw in an abrupt closure from your crowdfunder, and that might make you crazy.
That’s exactly what happened to Elias Lehnert, a fourth-generation piemaker who owns Legacy Pie Co., when Mainvest, a Massachusetts-based equity crowdfunding site, announced it was closing.
At the end of May, Mainvest sent an email to Lehnert and all his investors to announce its shuttering, he said. All dividends from Legacy Pie’s two capital campaigns would be frozen if investors didn’t withdraw them from custodial accounts — something akin to a Venmo account — in time.
Mainvest gave two weeks’ notice before closing on June 14, Lehnert said, and, at the time, he knew only the same basic information as his investors. When they called, concerned and confused, he barely had his head wrapped around the situation.
“It was pretty bad how it all went down,” Lehnert said. “I felt like they could’ve communicated things differently.”
Mainvest’s closure had largely nothing to do with the company itself. San Francisco-based Synapse Financial Technologies, a middleman between the crowdfunder and banks, collapsed in May, leaving much of Mainvest’s money in limbo.
The company also fell short on 2022 fundraising goals, but CEO Nick Matthews told The Boston Globe in May “if this Synapse thing hadn’t happened, we’d be continuing to operate the business right now.”
While Synapse’s bankruptcy got more attention from the fintech world, smaller companies like Mainvest, which exists because the United States Securities and Exchange Commision opened startup funding to the general public in 2016, fly under the radar.
According to its website, Mainvest helped more than 400 businesses raise over $40 million. In May, The Globe reported the company having $2.4 million in frozen funds. It is still unclear when that money will be able to move.
“Mainvest was a very small fish in Synapse’s big pond,” Lehnert said.
Lehnert used Mainvest months before to raise money for a new Wash Park location of his shop, which is an offshoot of his family’s Colorado Cherry Co., a longtime piemaker with locations in Estes Park, Lyons and Loveland. From September 2023 through January 2024, the campaign raised $140,000 from 240 investors.
He also used the service from September 2022 through January 2023, when he raised $124,000 for a remodel of his inaugural Tennyson Street shop.
Lehnert received all $264,000 across two campaigns shortly after each end. But hosting the campaign was only half of Mainvest’s promise; the company was supposed to facilitate investor repayment, too. Since it closed, that now falls on the business owner’s shoulders.
“The closure of Mainvest does not affect the Issuer’s obligations to repay you,” Mainvest wrote in that May email.
Because the Wash Park shop opened in March, only Q1 dividends were paid out through Mainvest. But the Tennyson Street location, which opened in 2020, paid out about a year’s worth of returns, Lehnert said. The quarterly yield ranges from one-fourth of a percent to one-four hundredth of a percent, depending on when someone invested in the company.
Lehnert does not know the total amount of frozen Legacy Pie dividends, largely because Mainvest handled that information. But it is at least $500 — the amount of his personal dividends from the Tennyson raise. Because there are over 200 investors, though, the real number is much higher. Investments ranged between $100 and $10,000 for both campaigns.
“People were frenzied. People were frustrated with me and my company,” he said. “It just didn’t make us look good.”
Mainvest told Lehnert they would help track his investors’ money, but the company has been unresponsive since mid-June. His messages have gone unanswered, and a “support hub” mentioned in Mainvest’s closing email is now a dead link.
There is also a support email listed on its one-page website that said it will “be live and monitored at a limited capacity as we work with the end banks that hold our user funds to assist in the return of funds to all end users.”
Mainvest did not respond to repeated requests for comment by BusinessDen.
The only interaction Lehnert has had with the company since it closed was when it sent him a Google Sheet with every investor’s name, email and quarterly dividend yield.
“We basically had to come up with our own system,” Lehnert said. At the end of Q2, he manually calculated and delivered the dividends himself.
“Like thanks for all the names and emails,” he said sarcastically. “But now we’re the ones who have to figure it out.”
Legacy Pie Co. has since found a new repayment facilitator, MicroVentures, so Lehnert fortunately can get rid of the piecemeal Sheets process. Around 90 percent of his original investors reupped on the new one, he said, though he noted the headache of explaining and re-explaining why he was switching.
Though the site is “much clunkier” than Mainvest’s, it gives investors the option to get dividends on a gift card rather than cash only. Lehnert said they can earn up to 20 percent to 25 percent more in value through this option, though he’s still working to nail down the specifics.
Despite the headaches and heartburn, Lehnert said he values crowdfunding.
“I think I’d do it again, but we’ll see.”
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