Innovating in America’s Favorite Place to Do Business

For more than 100 years, Delaware has been America’s favorite place to do business. About 68% of all Fortune 500 companies are incorporated in Delaware, and 93% of all U.S.-based initial public offerings begin by registering here.

In addition to tax benefits and other policies favorable to businesses, the big draw for corporations is Delaware’s Court of Chancery— the nation’s oldest court specializing in resolving disputes that involve the internal affairs of companies. While other states may have business courts, Chancery’s expertise and excellent reputation is unique to Delaware.

Since the 1980s, the state has also been a global leader in financial services. The world’s biggest banks have chosen to congregate here, especially those operating in the credit card sector. More recently, with the advent of the digital economy, Delaware has also become home to many financial technology — fintech— startups as well as to established players in this growing field.

Delaware also reacted quickly to a 1978 U.S. Supreme Court ruling allowing banks to market credit cards across state lines, with the interest charged based on their home state’s interest rates. Delaware quickly seized on the opportunities provided by that ruling by introducing the Financial Center Development Act in 1981, which offered corporate perks such as interest rate flexibility and fee schedules. Many of the first affinity credit cards — those that link an owner’s finances to their personal and professional allegiances — were issued in the state.

A third pillar in Delaware’s reputation as the place where businesses go to do business is much newer — serving as a cradle for fintech businesses. With many major banks already here, that was somewhat of a natural occurrence. But it also has to do partly with the public-private alliance the state is known for that fosters growth of all types of technology— medical, chemical, energy and now financial. A primary symbol of this commitment can be seen on the University of Delaware’ STAR Campus in Newark — the six-story FinTech Innovation Hub, which celebrated its official ribbon-cutting in 2023.

Created through a partnership between the Delaware Technology Park and Discover Bank, and supported by both state and federal funding, the FinTech Innovation Hub has been hard at work pooling resources to help individuals and families build wealth and fair access to credit. It also aims to support entrepreneurs intent on growing Delaware’s financial services sector.

Best Egg, a successful fintech lending and credit operator formerly known as Marlette Funding, was founded in Delaware by two former employees of major banks. Mean while, Miami-based fintech firm Novo, one of the country’s fastest-growing private companies, announced in late 2023 that it would open an office in Delaware.

“Small businesses make up more than half of Delaware’s workforce — an incredible testament to the work Delaware has done to make small business creation and growth as accessible as possible,” said Grant Sahag, vice president of operations at Novo, in a statement. “The Novo team is honored to be a part of Delaware’s thriving small business community.”

Indeed, Novo had opened an outpost at Stat International, a Wilmington coworking space, earlier in 2023, showcasing the fact that Delaware’s robust landscape of coworking spaces and incubators is another key attraction for businesses looking for help as they grow.

All these initiatives have been crucial to Delaware’s economy. A major study commissioned by the Delaware State Bar Association in 2019 found that the “legal industry contributes $2.4 billion to Delaware’s economy, with legal sector jobs contributing to the state’s gross domestic product at double the rate of other major sectors.” Further, it said, in 2018 alone approximately 4,500 out-of-state lawyers sought temporary admission toDelaware’s courts, generating $1.7 million in fees.

The banking and financial services sector is equally important. The Delaware Prosperity Partnership reports that today 51,000 jobs — or 9% of the state’s employment — is attributable to the financial services sector.

All this activity has created a haven for innovative businesses and support services. Here is a look at four varied organizations that have prospered and grown — and have helped others do so — in recent years.

The Innovation Space: Giving Startups Room to Grow

In 2017, there was a dearth of laboratory space in Delaware for startups and small scientific businesses that were looking for room to grow.

To meet this need, a group of scientists, educators and business and government leaders, led by the State of Delaware, the DuPont Company and the University of Delaware, founded a nonprofit organization originally called The Delaware Innovation Space, located in a vacated building on the grounds of the DuPont Experimental Station with “the goal to transform science-driven startups into successes.”

Seven years later, The Innovation Space’s founder, president and CEO, Bill Provine, says the organization is helping meet that need. “We have 130,000 square feet of laboratory space, and we are home to everything from two or three people with a great idea to established companies who need room to grow.

We also provide virtual assistance to companies across the country, letting them know that Delaware is a place with scientific leadership.”

Although Provine says he imposes no timeline on companies to leave the Space’s “nest” for their own headquarters, he is proud of the organization’s alumni. “Prelude Therapeutics had probably 100 employees when they moved to their own offices,” he says. “When they left, they had grown to occupying about 20-25% of our total lab space.” Other notable alumni of The Innovation Space, he notes, include Adesis and Versogen, both growing, science-based companies. Today, the lab space they’ve left is being filled by other companies.

While Provine says his organization’s flexibility is a key to providing companies assistance, The Innovation Space has three primary programs:

1] An important source of revenue is First Fund, which provides eligible early-stage startups with up to $200,000 in cash, lab space and support services via a convertible note.

2] Another program, called SparkFactory, helps transform ideas into reality by giving a forum for new business founders to pitch their ideas and visions to a community of entrepreneurs and innovators and receive real-time feedback, plus follow-on mentorship. To help hone these presentations, each founder is paired with an entrepreneur-in-residence for a month leading up to their Spark Factory event.

3] Finally, The Innovation Space’s Science Inc. Accelerator provides early-stage, science-based startups the opportunity to more quickly advance their companies over a four-month period toward meeting major goals they have established.

But beyond programs, a key part of The Innovation Space’s success is the collaborative atmosphere the organization engenders. “After all,” Provine says, after seven years of success, “we’re still in growth mode ourselves.”

The Mill: Helping Businesses Do Business

“I think hybrid is the future of business,” says Rob Herrera, referring to the model where employees spend some of the time at an office and the rest of the time working remotely. It’s a prediction that bodes well for spaces such as Herrera’s The Mill, a shared workspace in downtown Wilmington. The Mill also has a second location known as The Mill Concord on Silverside Road. A third is in the works in Southern Delaware’s Seaford.

Herrera started out as an architect designing workspaces around the world for Perkins Eastman before deciding in 2016 to open one of his own in what had been the DuPont Company’s Nemours Building. He began modestly, with 28 offices at the time.

His new business nearly flat-lined in March 2020, Herrera says, when COVID shut down most office work for almost two years. “And we had just opened our Concord facility a few months earlier,” he says, adding, “2020 and 2021 were devastating to our bottom line a The Mill.”

Four years later, The Mill is thriving. In February, four years after the pandemic started, The Mill took occupancy of an additional floor in the building now called Market West, a 38,000-square-foot expansion that added 30 furnished offices of various sizes, some of them suites. Additionally, it offers loads of business and social amenities — outdoor terraces, a video and audio podcasting suite, along with wellness spaces with treadmills and maternity facilities. With a total of 104,700-square-feet, Herrera’s The Mill is now one of the largest traditional co-working spaces in the Greater Philadelphia area.

Herrera, a graduate of Caesar Rodney High School, says that his business’s big rebound has come about by adjusting to a changing environment.“ What we are seeing is a big swing in 2023 and 2024 to a different cohort of midsize to large companies who traditionally signed 10-year leases in office buildings, but now choose not to,” he says. “What they are now looking for is a turnkey operation with everything already available for occupancy, and only a one-to-five-year lease, although one year is generally too short for their size. At the same time, we’re also continuing to do well with smaller suites from when we started, with companies like Zip Code Wilmington, the Delaware Prosperity Partnership and a large law firm.”

Yet Herrera is not comfortable with thinking that everything has settled down into a neat package. “While most employers don’t want to say, ‘You don’t have to come to the office,’ they’re still trying to figure out this newer world — just like the rest of us. What is the right balance?”

One thing Herrera has learned is that when employees do come to the office, they want a more dynamic workspace.“That’s why we have happy hours and special events,” he says. “That attracts more employees who work from home to want to come into the office more often.”

The Seaford facility being developed will be part of a larger redo of an old shopping center that will yield a mixed business space whose redesign Herrera is overseeing in its totality.“We’ve finished construction plans,”he says, “and we’re still targeted for 2025 occupancy.”

Even The Mill Concord, which almost died at birth, is doing well. “We now have occupancy there in the high 80%,” Herrera reports.

Nester: Uncovering the Real Cost of Buying a Home

Even though you may have enough money to buy a new house, will you have there sources needed to maintain its upkeep — those expenses not included in calculating whether you can afford your mortgage payment? And how would you know what the costs of these repairs and replacements will be, when they might occur and how much money you would need to set aside in anticipation?

Those were two questions that intrigued Brendan Kennealey when a friend, during a dinner conversation three years ago, was contemplating home ownership. Kennealey saw the business opportunity and came up with the answer: Nester, an app that supplies crucial information to people buying homes as well as those who own homes — plus municipalities and other local governments who want realistic information for their assisted home-buyer programs.

“I realized there wasn’t a Carfax-like app for people who want to own homes,” says Kennealey, a Harvard Business School graduate who was president of Salesianum from 2011 to 2021. “A home inspection tells the buyer if everything works and whether it’s up to code. We walk a buyer through a series of questions that takes about 20 minutes, and then we do an instant report with follow-up questions the potential buyer may want to ask.”

For example, a typical report will first tell the potential buyer all the basic monthly expenses of buying —mortgage, utilities, taxes, insurance and related items — but then goes on to outline potential expenses likely to be incurred over the next five years, six to 10 years and 11 to 15 years. When will the HVAC unit most likely need to be replaced? The roof? The driveway? Washer, drier and dish-washer? What about when the house will need a new coat of paint?

“This analysis will help the buyer not only look at his own finances for taking care of these expenses,” Kennealey says, “but it also provides questions to ask the seller’s agent and possible points to be negotiated.”

If the buyer is looking at multiple houses, the Nester app can handle those at the same time — at a rate of $57 for one home and up to eight homes for $87. “And we’ve also found that many homeowners also use our services to anticipate maintenance costs.”

But a growing part of his business, Kennealey says, is now with municipalities and other local governments who provide assisted housing for underserved populations, such as Habitat for Humanity. The logic is that it makes little sense to provide people with affordable housing if owners don’t understand what is involved in maintaining it. “We are working with the City of Wilmington on some of its projects,” he says.

Kennealey says right now he isn’t worried about competition because there isn’t any. “No one does what we do.”

Whipflip: Taking the Hassle Out of Car Sales

Sometimes a new business seeking to disrupt an industry becomes successful because it removes one more hassle from everyday life.

That’s what Roger Clappe is doing with WhipFlip.

“I’ve had prior business experience on both sides of the consumer-car dealer relationship,” he says, so he thought he knew a way to make selling a used car simpler for consumers and a way to help dealers better manage used-car inventories.

Enter WhipFlip, a Wilmington company Clappe founded that helped his first customer sell a used car in August 2020. “We’ve bought thousands of them since,” Clappe says. WhipFlip provides someone looking to sell their car with an almost-instantaneous first quote, followed by a one-stop meeting with the seller and the car to be sold where there is the exchange of ownership documents, keys and a check for payment in full. The deal finished, the seller leaves the car where it is to be picked up later.

“We’re a real AI company,” says Clappe, who began using artificial intelligence a couple of years before the technology hit national headlines. As a result, most of the work for the owner is done simply and quickly online in three steps:

1. Visit the WhipFlip site and enter vehicle details for an initial offer.
2. Receive a final offer through the online automated vehicle valuation tool.
3. Accept the offer — or not —and upload vehicle title and other documents.

“AI allows us to complete all three steps in three to five minutes,”Clappe says.

Another advantage is that WhipFlip controls the whole selling and buying transaction with minimal use of third parties. A WhipFlip “car concierge”meets with the seller and the vehicle to complete the sale at a place the owner designates. Keys are put in a lock box for a transport vehicle to arrive in one to three days. Car review giant J.D. Power is one of WhipFlip’s partner companies.

“The process has to be great for everyone for it to work,” Clappe says.

Presently, WhipFlip is head-quartered in The Mill’s downtown Wilmington location, and it now has more than 30 full-time employees onboard. The coverage area for transactions has also increased to cover “eight whole states,” Clappe says, and “we plan to quadruple that in the next 18 months. The amount of the transaction per vehicle covers the whole spectrum from $1,000 to a Ferrari we recently purchased for over $200,000.”

More recently, Clappe has begun using WhipFlip’s technology to help car dealers manage inventory by selling and trading vehicles with each other. One dealer might have too much of something while another lot may have too little. WhipFlip helps them to balance this by working out deals with each other.

Like most startup firms, WhipFlip needed to acquire some outside resources. “We had a decent round of funding a couple of years ago,” Clappe says, “and we are considering having a Series A round not too far in the future.”Biggest problems to date?

“It’s been a wildly fluctuating auto market the past two years, first with short supply and then too much,” Clappe says. “Then there are the normal growing pains from expanding. But those are the kind of challenges that excite us!”