Wednesday, March 24, 2010

There May Be No More Angel's in Your Outfield

Ran across an interesting post today on The Huffington Post from the Kauffman Foundation. In the piece, written by Robert E. Litan, the vice president of research and policy at the Foundation, he describes potential impacts to those entrepreneurs raising funds from angel investors.

From the article:

Tucked away in a few pages in the comprehensive financial reform bill outlined by Senate Banking Committee Chairman Senator Dodd (D-Conn.) are provisions that would raise the costs of angel investments in startup ventures. These provisions are both unnecessary and unhelpful at a time when policymakers should be looking for ways to make it easier to finance new businesses, especially the potentially high-growth, job-creating companies capable of attracting outside investors. Under existing law, startup companies can raise money easily and quickly from "accredited investors" -- individuals with substantial wealth or income.

There is no need for the companies or the investors to gain approval from any state or regulatory official. All of this would change if Section 926 of the Dodd bill is included in any final reform legislation. That section would require, for the first time, companies seeking angel investment to make a filing with the Securities and Exchange Commission, which would have 120 days to review it. This would both raise the cost of seeking angels and delay the ability of companies to benefit from their funding.

While the angel community is investing in deals, there are lots of opportunities for wealthy individuals other than just entrepreneurs, such as the distressed real estate marketplace. As an entrepreneur and an angel investor, the last thing we need is more roadblocks placed on the raising of funds from these angel investors.

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