Mainvest Collapse Impacts Businesses

With the abrupt closure of Mainvest, a national crowdfunding platform for small businesses, Lawyers for Civil Rights (LCR) is calling on the federal government to protect affected small business owners and investors. An estimated $2.4 million in capital is now frozen, with no clear plan for its release.

Since 2018, Mainvest has helped more than 450 entrepreneurs raise $30 million in capital. The platform facilitated investments as small as $100 and connected 30,000 investors to small businesses launching in their own communities.

On June 14, with little notice, Mainvest ceased operations after Synapse, a financial intermediary, filed for bankruptcy. 

“Mainvest supported the launch of hundreds of small businesses in Massachusetts, including LCR | BizGrow clients such as Comfort Kitchen and Third Cliff Bakery. Mainvest removed barriers to raising capital, particularly for women, immigrants, and entrepreneurs of color who have less access to funds from other sources,” said Roz Freeman, LCR’s Entrepreneurship Manager.

Mainvest’s dramatic closure has left small businesses and community investors in limbo. Withdrawals, investments, refunds, and repayments have halted. This is having an immediate and serious impact on cash flow for small businesses, particularly for those who were about to launch. 

To protect affected investors and small businesses – and the vibrancy of our local economies –  LCR is asking federal agencies, including the Financial Industry Regulatory Authority (FINRA) and the Federal Deposit Insurance Corporation (FDIC) to step in and ensure an orderly transition as Mainvest shutters, including the release of frozen funds. Third-party oversight is critical for negotiating with multiple financial players involved, providing clear guidelines around process and procedures, and protecting affected individuals from predatory schemes. 

“We have seen federal regulators step in quickly when banks fail, to protect wealthy depositors. Small minority-owned and women-owned businesses deserve no less. Immediate federal intervention is critical to ensure that these small businesses are not left in the lurch by Mainvest’s closure,” said Oren Sellstrom, LCR’s Litigation Director.

The open letter is available here.