In which Congress once again contributes to the problem

[unixronin]

I don't appear to have access to the full article (the portion I can access is here; you may be able to read the whole thing), but writerspleasure points out that Sen. Chris Dodd's financial reform bill includes an ill-conceived measure that would place severe restrictions upon "angel" investors funding startups.

I don't know, and won't speculate, why Sen. Dodd is doing this, except to ask cui bene, but as pointed out in writerspleasure's post, this would be a disaster.  Startups funded by angel investors are less than 1% of all companies operating in the US, yet account for around 10% of new jobs, in addition to being one of the major sources of innovation in the US.

This measure sounds as though it would be tantamount to taking an already-staggering startup segment of the economy out behind the barn and slitting its throat over a bucket.

Comments

[lebo-superman.livejournal.com]

I've had the opinion for several years now that our government has quit even pretending to care about anyone who isn't either an elected federal official or a multi-millionaire. Everything else they do is just posturing to keep their jobs, while they destroy the country as quietly as possible.

[masgramondou.livejournal.com]

There seems to be absolutely no logical justification for these parts of the bill (not that the rest is necessarily better but I haven't studied it) and they do indeed create totally pointless roadblocks for founders of new companies.

The only reason I can see why anyone would want these measures would be to deliberately reduce competition for existing businesses - not just high tech startups but anything else where an external investor might be able to provide startup capital to get a project off the ground.

Furthermore, given that these days the Internet and related technologies mean that development costs have diminished, these changes seem almost designed to make lowcost alternatives to large VC funded startups non-viable. I do almost wonder whether the sponsors of this segment of the bill are actually large VC firms.

[unixronin.livejournal.com]

You might very well have something there.

[mazianni.livejournal.com]

Found this in an op-ed piece:

For example, the bill would delay and curtail investments by "angel" investors in promising startup companies. This is because it paints with too broad a brush, targeting the activities of acknowledged frauds like Bernard Madoff, but splattering the entrepreneurial economy in the process. (http://www.oregonlive.com/opinion/index.ssf/2010/04/financial_reform_waits_for_ano.html)


Another article said:

As originally written, the bill would have raised net worth and income requirements for being an accredited angel investor from $1 million and $250,000, respectively, to $2.3 million and $450,000.

It also would have subjected angel investors to more stringent regulation, especially when a deal involved angel investors from more than one state. (http://articles.courant.com/2010-04-23/business/hc-hc-financial-reform-angel-ca.artapr23_1_angel-investors-reform-bill-matthew-nemerson)


Another article at Business Week (http://www.businessweek.com/news/2010-04-23/angel-investors-close-to-deal-removing-curbs-from-finance-bill.html) states the situation is still fluid with negotiations taking place, but it seemed likely that the angel investor restrictions would be scaled back.