Six months after new rules took effect that allow Maine entrepreneurs to solicit investment funds from the general public, no one has actually tried it.

Since Jan. 1, companies have had the ability to apply to the state Office of Securities for approval to raise up to $1 million by selling shares through a practice known as equity or investment crowdfunding. The program was widely touted by the state’s entrepreneurial community at the time.

But as of Friday, not a single company had completed the application process, according to Office of Securities spokesman Doug Dunbar.

Brad McCurtain, president of Maine Securities Corp. and an advocate for the equity crowdfunding rules, said the primary reason for the lack of participation is probably the amount of paperwork required. The process involves lengthy disclosures such as what risks the business faces, what its marketing plan is, how many shares it plans to sell and at what price, as well as a detailed business plan and audited financials.

“None of that is really difficult, but for a lot of people their brains shut down when you put something so voluminous in front of them and say, ‘Fill this out,’ ” McCurtain said.

Still, McCurtain said he doesn’t believe the process should be simplified.

“I’m not advocating making them any shorter because they represent disclosures any investor should know about before putting money into a company,” he said.

Greg Fryer, a partner at Verrill Dana who helped write the crowdfunding law, said he had hoped there would be more activity by now.

“It would great if there were already four or five or six companies, but I wasn’t expecting a dozen by now,” he said. “There being zero goes to show this is new and it will take people a while to get used to it.”

Crowdfunding is the act of obtaining a large amount of money by soliciting small amounts from many individuals. It is often associated with websites such as Kickstarter and Indiegogo, which allow people to donate money to a project or business in return for gifts such as a product to be made with the funds. The gifts are not guaranteed, even if the business raises enough money to reach its funding goal.

Maine’s new equity crowdfunding law differs in that it allows people to buy a stake in the business from which to profit if it succeeds.

Although there are some exceptions, federal law allows private companies to sell securities only to high-net-worth individuals, known as “accredited investors.” They must have a net worth of at least $1 million, not including the value of their primary residence, or have earned at least $200,000 a year for the past two years.

The federal JOBS Act, which became law in 2012, opened the door to equity crowdfunding from nonaccredited investors, but the U.S. Securities and Exchange Commission has yet to finalize the necessary rules.

In the absence of federal rules, Maine and 22 other states have created their own. Maine’s law complies with existing federal law by limiting the amount any single person can invest to $5,000 and prohibiting companies from raising more than $1 million in any given 12-month period.


Josh Davis, co-founder of Brunswick-based Gelato Fiasco, said he is aware of the program but is not considering it, primarily because his business already has secured investment from accredited investors. Davis said accredited investors provide mentorship as well as money – something that does not happen with crowdfunding.

“It’s not really appealing to get a crowd of people and get their money,” he said. “You really want access to the experience, the skills and connections behind the money.”

Seabren and Whitney Reeves, founders of Brunswick-based Bitzy Baby, which sells safety bumpers for cribs, aren’t interested in soliciting any form of investment because they don’t want to give up any ownership in their company, Seabren Reeves said.

Bitzy Baby has raised more than $70,000 by various methods, including numerous grants from the Maine Technology Institute and a small grant from the Libra Future Fund.

“There was definitely a lot of good work that went into this law,” he said. “But from our company’s point of view, we believe there’s a lot of alternative and creative ways to raise funds, especially when starting out, to maintain the heart and soul of the company.”

Kay Aikin, CEO of Introspective Systems, a Portland company that makes software for architectural firms, said she may consider equity crowdfunding the next time her company seeks to raise money.

Aikin was surprised to learn that no Maine companies have tried it, but she said it might be because crowdfunding is hard for businesses that don’t already have a tangible product to sell. There is a difference between pitching a startup to a group of sophisticated investors and pitching to the general population, she said.

“The average grandma isn’t going to understand it, and the average grandma won’t invest in it if she doesn’t understand it,” Aikin said.


Despite crowdfunding’s slow start, McCurtain said he’s still bullish on it. He has partnered with two young entrepreneurs, William Sullivan and Kate Curran, to launch an online platform to help Maine companies sell securities to the public. The team plans to launch later this year.

McCurtain said that once the first company goes through the process and successfully raises capital, it will generate awareness of the program, which will in turn attract others to investigate the opportunity.

“I wish I could predict where we’d be a year from now in terms of how many companies apply for approval and raise capital,” he said. “We really don’t know, but there’s such a vibrant entrepreneurial community here in Maine, particularly in the Portland area, that it’s only a matter of time.”