Urgent: Please help save angel investing

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Urgent: Please help save angel investing

Postby katchal » Thu Apr 15, 2010 12:12 pm

Although I live in the DC area, I don’t usually get involved in politics. And I rarely reach out to others to ask for political action. But hidden in the big banking regulation & bail out bill that the Senate is currently debating, Christopher Dodd has included major changes to regulations for private investors. These will have a devastating effect for angel investing and early stage tech startup companies like mine. I honestly don't know how many early stage tech companies will survive if this passes.

Major changes to angel investing in the bill include:

1) the requirements threshold for being an “accredited investor” will be raised from a net worth of $1 million or income of $200,000 to a net worth of $2.3 million or income of $449,000. BusinessWeek estimates that this will make approximately 77% of potential angel investors ineligible for accreditation. (Accepting investments from non-accredited investors causes significant regulatory and legal costs later in the startup's life and can significantly impact the company's ability to attract venture funding in later stages)

2) once an investment deal is agreed upon, it forces companies to wait 120 days before they can receive the funds - four months is an eternity for an early stage company.

3) it eliminates Federal regulation preemption for companies who have only accredited investors - this means that small, cash-strapped companies will have to navigate the legal and accounting requirements of both Federal and state regulations - and for multiple states if the investment is syndicated across state borders. Very difficult and very costly.

4) all startups who plan to seek funding will have to register with the SEC, thus incurring significant legal and accounting fees before they even have a chance to attract investment. For many of us who are bootstrapping our companies and aren't already millionaires, this will be prohibitively expensive - we'll never even have a chance to attract capital for our companies.

Startup funding has NOTHING to do with banks. It doesn't even make sense for this to be included in a banking bill anyway.

Please, please help! I implore you to take a few minutes to learn more and contact your senators at congress.gov if you're willing to help. This isn't just a "rich guy" issue - thousands of entrepreneurs and their potential employees will be hurt from these regulations. And an entire generation of new startups may never be born.

Learn more here:

Here's the bill:
http://banking.senate.gov/public/_files ... onBill.pdf

SaveRegD - information site with online petition:
http://www.saveregd.com/

Related articles and blog posts:

Startups Get Hit By Shrapnel In The Banking Bill by Fred Wilson
http://www.avc.com/a_vc/2010/03/startup ... -bill.html

Dodd's Attack on Angel Financing from Seattle Tech Flash
http://www.techflash.com/seattle/2010/0 ... +Source%29

Open letter from National Venture Capital Assn and Angel Capital Assn
http://www.angelcapitalassociation.org/ ... 20Bill.pdf

Angels sing: ‘frankly ridiculous’ restrictions might ‘destroy Silicon Valley’
http://venturebeat.com/2010/03/26/angel ... hris-dodd/
katchal
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