The proposed Colorado Crowdfunding Act would open up the potential pool of investors that start-ups can approach for funding.
By law, only accredited investors can buy stock in a private company today, and such investors must make at least $200,000 annually and have a $1 million net worth.
The bill allows any Colorado resident to invest up to $5,000 in a company without the need for accreditation.
“The challenge right now with a Colorado company trying to raise money is if they want to get outside investors, wealthy investors or venture capitalists, they have to go through such a labyrinth of securities laws and lawyers,” said bill sponsor Rep. Dan Pabon, D-Denver, during a press conference Wednesday. “The overwhelming cost and burden is on that particular business.”
Pabon’s bill would require the company and investor to be based in the state and that 80 percent of the proceeds of investment is spent here. House Bill 1246, introduced Tuesday, limits it to companies raising $1 million — or $2 million if they provide audited financial statements.