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)