Senator Dodd’s Financial Reform Bill Will Significantly Reduce Angel Investor Pool

Critical to startups is access to angel capital. Angel capital almost always comes from “accredited investors” as defined in the federal securities laws. These are most often investors with more than $200,000 in income in the last 2 years (or $300,000 with spouse) with the expectation of the same this year, or investors with more than $1,000,000 in net worth (including joint net worth with spouse).

You can find the definition of accredited investor here.

Senator Dodd’s financial regulatory reform bill would go back in time to when those thresholds were originally put in place and index them to inflation. Business Week estimates that this will reduce the angel investor pool by 77%.

Obviously, this would put a crimp in angel financing, and hurt the overall startup ecosystem. Barney Frank’s bill, which passed the House, didn’t have this provision. Let us hope, for the sake of the ecosystem, that Senator Dodd’s proposal does not become the law. 

(The opinions expressed here are my own. For more information on this issue, see http://www.saveregd.com)

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  • http://www.visionbusinessadvisoryservices.com James M. Anderson

    I have spent the last thirty years in the “startup” business. I have successfully formed, funded, and sold numerous businesses. The one thing that is always needed in those “brave few” who can see the vision and wrangle an investment return while increasing new business creation, employment, etc. This would inflict major damage to my business and by reasonable extension, to any entrepreneurial type. We all can’t work for the government. This cannot pass.

  • Joe Wallin

    James, thank you for your comments. I couldn’t agree more. I think this would be very damaging to the startup community. We need to write and call our elected representatives and do everything we can to draw attention to this issue. Last I heard the likelihood of a financial reform bill becoming law this year is very high.

 
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