When Prequel launched at the former Living Social building on 918 F St in Penn Quarter earlier this year, Washingtonians of all income levels could invest in a new popup restaurant and earn an equity stake with the potential to make more if the business grows. Residents were taking advantage of the new DC law that allowed non-accredited investors to crowd fund a new business and earn a stake in the ownership. Previously, only accredited investors with incomes more than $200,000/year could invest.
Local chefs used the building to showcase their food and drinks and locals could sample, enjoy and hopefully invest. All DC residents needed was $100 to invest to potentially get a return on the investment. Despite the low cash requirements, investors were required to sift through a lot of paperwork and do their due diligence on the new companies.
But starting this month, investors who provide less than $5,000 will just receive the equal amount of credit to dine and drink at the restaurant plus $200 worth of food and drinks each year the restaurant is opened.
So if the popup becomes successful, these investors will no longer receive a share of the profits. But if the popup fails, they may not be able to recoup back the money they originally invested.
Meanwhile DC and the rest of the nation are awaiting the final regulations for the Jumpstart Our Business Startups (JOBS) that are being written by the Security and Exchange Commission. So standby, the rules could change again.
This doesn’t sound like a good deal anymore. Why would anyone want to invest money on a popup when there’s no guarantee that it’ll be around in a year.