August 25, 2019
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Boston firm executive developing Katahdin-area investment fund

Contributed photo | BDN
Contributed photo | BDN
Michael Faloon

Think of an investment fund dedicated exclusively to Katahdin region businesses, and you’ll have a pretty good idea of what some community activists plan to launch in December.

OurKatahdin Capital, an investment fund being developed by chartered financial analyst and Medway native Michael Faloon Jr., will allow people interested in helping the region’s economy to directly invest in area businesses.

“The biggest plus is it allows the community to invest right back into the community,” said Mike Seile, general manager at Somic America in Brewer and a member of the board of directors of Our Katahdin, a volunteer group of present and former East Millinocket, Medway and Millinocket residents dedicated to helping the region recover from the loss of its paper mills.

“It is a social investment that has a chance of return right in the local economy. That means that residents can take interest and control of their local economic development by investing in their local businesses and entrepreneurs,” Seile added. “It is right at the very cutting edge.”

Faloon will assist in the vetting process of businesses seeking to tap into the fund. He is chief operating officer of Standish Mellon Asset Management of Boston, which employs about 150 people managing $170 billion in fixed income assets on behalf of individuals, corporations, sovereign wealth funds and foreign central banks, according to Faloon.

The Katahdin fund may be among the first of its kind, he said.

It is based on the Jumpstart Our Business Startups Act, or JOBS Act, of 2012 and its definition of crowdfunding, Seile said. Crowdfunding, according to the U.S. Securities and Exchange Commission, is “an evolving method of raising capital that has been used outside of the securities arena to raise funds through the Internet for a variety of projects ranging from innovative product ideas to artistic endeavors like movies or music.”

Title III of the JOBS Act creates an exemption under federal securities laws to make this type of funding method easily used to offer and sell securities.

The JOBS Act established the foundation of a regulatory structure for this funding method. Under the Katahdin-area plan, the OurKatahdin board of directors will administer the fund. It will be open to any investor. Its portfolio will consist of established Katahdin region businesses and fledgling businesses that pass a board analysis, Faloon said.

“It’s like a mutual fund,” Faloon said. “The investment dollars people will be sending in will go into a big pot. Your investment for $100 gets a lot more power when a lot of people send in $100.”

The fund’s offering documents — investor’s prospectus and subscription agreement — are under legal review and should be finished in December, Faloon said.

Faloon encouraged businesses in the region or people interested in relocating or launching businesses in the Katahdin region to contact him through OurKatahdin.com, the group’s website. Three businesses have expressed interest in the idea. The funding also can be used to redevelop properties or bolster grants, he said.

OurKatahdin Capital will work through Bangor Savings Bank and Katahdin Federal Credit Union. It’s too early to say what an investor’s return on investment will be, but Faloon said he hopes for 6 percent. That’s a margin large enough to be gratifying to all parties. But like all investments, profit is not guaranteed.

“The rise or fall of the return is going to depend on how the local economy shapes up. That is a major risk,” Faloon said.

The concept of crowdfunded community reinvestment is new and drawing attention from officials in New Brunswick interested in pursuing it, according to Nancy DeWitt, a member of the OurKatahdin board of directors.

“They have a lot of towns that are in the same shape we are in,” DeWitt said. “Maybe this is something that these other one-industry towns can do. I hope so.”

DeWitt and her son, Sean, had crowdfunded community investment in mind when they began OurKatahdin.com, the website for the nonprofit organization, in December 2014.

The group manages 11 community development fundraising projects aimed at improving the region’s business climate and quality of life. The volunteer efforts completed or underway include the restoration of the East Millinocket gazebo, the busing of residents to Stearns High School tournament basketball games, a Katahdin-region Santa house and a Millinocket farmers market.

Faloon, 40, whose family has lived in Medway since 1859, became interested in OurKatahdin at the urging of Sean DeWitt.

“He knew that I was a Medway boy, and I had reached out to him about starting something similar in the area a few years before. It just came full circle. The timing was right. It is tough to go back home to visit family and watch it in a steady state of decline,” Faloon said. “Anyone who knows me knows that I have a lot of pride in where I am from. It is really calling on those things.

“The thing I am looking forward to is providing — and I don’t want to become too grandiose — a lot of capital that is meaningful,” he added. “The one thing we really have on our side is hope. The power of positive thought cannot be underestimated.”

 

Correction: A previous version of this story incorrectly stated that OurKatahdin Capital would be a limited partnership.


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