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Politics Northwest

The Seattle Times political team explores national, state and local politics.

March 12, 2014 at 5:25 PM

Bill easing start-up investing heads to Inslee’s desk

OLYMPIA – New businesses in the state would have more access to funding and people would have more opportunities to invest under a bill headed to Gov. Jay Inslee.

House Bill 2023  would allow entrepreneurs to finance start-ups through small contributions from a large group of investors. It would let people in the state invest in such ventures.

Anyone could invest up to $2,000 or 5 percent of their annual income or net worth in a one-year period. People who make more than $100,000 a year would be able to invest more, up to 10 percent of their annual income or net worth.

Right now only accredited investors can purchase ownership of new companies, leaving few options for entrepreneurs to fund their businesses and leaving out most people who would like to invest.

Most states still operate under securities laws written after the stock market crash of 1929, which set a high bar for accreditation. People must make more than $200,000 each year or have more than $1 million in assets, excluding real-estate value, in order to purchase private equity.

That means only about 3 percent of the country can invest in anything they want, according to Michael Libes, founder of the Bainbridge Graduate Institute, a 12-year-old accredited business school. The other 97 percent can invest in the stock market, but most business owners can’t afford to take their companies public.

People can donate to new ventures websites, such as Kickstarter or Indiegogo, but they don’t receive ownership of the company.

State Rep. Cyrus Habib, Kirkland Democrat and prime sponsor, says his bill will democratize start-up investment. Small businesses can directly approach investors for funding and people who want to invest will have more options, he said.

Congress passed a federal version of the measure two years ago, but the Securities Exchange Commission is still working on rules to regulate the act’s section on crowd-funding. The state measure would be more accessible to business owners and investors in the state, Habib said.

Start-ups are responsible for more net job growth than other industries, said Brian Bonlender, director of the state Department of Commerce.

In Washington, there’s a “mismatch of shared ideas and innovations versus the amount of available capital,” he said.

The measure passed in both chambers and is on it’s way to the governor. The state Department of Financial Institutions will have about one year to issues rules.

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