Bipartisan Bill to Boost Blue Hen Bootstappers

Governor Markell joined members of the General Assembly today to announce legislation that will allow Delawareans to become equity investors in Delaware start ups.

The bipartisan bill, which will be filed when the legislature returns to session next week and is sponsored by Representative Bryon Short (D-Highland Woods) and Senator Brian Bushweller (D-Dover), would permit the use of online crowdfunding platforms, allowing Delaware residents to be investors in Delaware start-ups and small businesses, expanding the potential pool of investment capital for small businesses while also giving Delawareans the chance to be early stage investors in these ventures.

That sounds good, but I’m a little skeptical.  I mean, with perfect hindsight, I’d love to have been an early investor in Dogfish Head, for example. However, are there really a bunch of start ups willing trade equity for capital so early on in the start up process?  Would Sam Calagione have done that?   I feel like that could end up begin some very expensive capital.  

Here is more of the nuts and bolts from the press release:

The bill would enable Delaware-based companies 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.) Although the bill would require certain disclosures in order 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. A business can raise up to $1 million over a 12-month period and an individual can 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.”