Enacts Governor’s State of the State proposal to improve access to capital

Wilmington, DE – Today at the coworking space The Mill in downtown Wilmington Governor Markell signed legislation that will give entrepreneurs across Delaware increased opportunities to access capital to grow their businesses.

Sponsored by Representative Bryon Short (D-Highland Woods) and Senator Brian Bushweller (D-Dover), HB 327 permits the use of online crowdfunding platforms and allows Delaware residents to be investors in Delaware start-ups and small businesses, expanding the potential pool of investment capital while also giving Delawareans the chance to be early stage investors in these ventures. The measure enjoyed broad bi-partisan support and was passed unanimously in both houses of the General Assembly last month.

“At a time when small business and entrepreneurs have a bigger stake in our state’s economic future we want to make sure that those with ideas to start new businesses and expand their employment have the opportunity to succeed right here in Delaware,” Governor Markell said. “By demonstrating support across state government for Delaware’s growing entrepreneurial sector, we’re taking another step to build on Delaware’s record-setting job growth in the years to come.”

The Governor highlighted the crowdfunding initiative during his State of the State address earlier this year and it follows action by the Congress, through leadership from Congressman John Carney, which gives states the flexibility to permit citizens to more easily invest in startups. Around the world, crowdfunding allows companies to raise billions of dollars, and this year for the first time this amount of investment is expected to exceed funding provided through traditional sources like venture capital.

“We need to make sure our laws keep pace with technology so that our small businesses have access to new methods of raising much-needed capital,” said Representative Bryon Short, the bill’s prime sponsor in the House. “Delawareans have a strong sense of pride in locally owned and operated businesses. This law takes steps to help new companies by enabling Delaware residents to invest and participate in the success of homegrown Delaware start-ups.”

Through the legislation the Governor signed into law today, Delaware-based companies will be permitted to offer equity stakes to Delaware residents or other Delaware businesses over internet platforms. (Due to Federal law, Delaware cannot permit investment from residents of other states.) While the new statute requires certain disclosures to ensure the validity of the offerings, it does not require issuers to make detailed financial disclosures that might be prohibitively costly for many small businesses and start-ups. It permits a business to raise up to $1 million over a 12-month period and an individual to invest up to $5,000 in any one offering.

“We must strike the right balance between protecting the public from fraudulent activity and making sure our small businesses can access investment capital, and this bill accomplishes that,” said Senator Bushweller, the bill’s prime sponsor in the Senate. “I look forward to working with my colleagues to pass this into law.”

“This law is a recognition of the changing landscape of how businesses are conceived and financed in the 21st Century,” said Representative Lyndon Yearick, R-Dover South. “There are many examples of businesses that got their start through online crowdfunding. It’s time we allow Delaware entrepreneurs to tap into a resource that could help them turn a dream into a viable enterprise.”

“Any advantage we can give our home-grown companies is a benefit in the new economy,” said Senator Greg Lavelle. “It’s important to give Delaware companies access to Delaware investors, and any time we can do that in a safe and responsible way, we should.”

The Delaware Attorney General’s Investor Protection Unit will maintain oversight of sale registration and equity offerings.

“It has never been more important to maintain a nurturing and supportive economic environment in our state that will encourage growth for small businesses,” said Congressman Carney. “I am proud that I was able to join a bipartisan effort in Congress to make it easier for small businesses to access needed capital through new, innovative platforms, which has paved the way for our state to take advantage of this opportunity.”

“This bill represents an economic development opportunity for small businesses in Delaware and encourages Delaware citizens to engage more directly with businesses they want to support,” said Rich Heffron, Delaware State Chamber of Commerce President. “This is exactly what we need to encourage growth and to expand Delaware’s entrepreneurial culture.”

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