Proposed Bill Would Hurt Angel Investors and Entrepreneurs

Posted by: Mark Marich on March 27, 2010 Source: Policy Dialogue on Entrepreneurship

Kauffman Foundation Vice President Robert Litan argues in an opinion piece published in the Huffington Post that proposed 'protections' for angel investors in Section 926 of the comprehensive financial reform bill outlined by Senate Banking Committee Chairman Senator Dodd are unnecessary and will hurt America's job creators.

Currently, startups can raise money rather quickly from accredited angel investors without state or regulatory approvals. Litan explains how this would change dramatically with many provisions in this section that would raise the costs of seeking angel investors--individuals with substantial wealth or income who invest in startup firms. This section would require companies seeking angel investments to file with the Securities and Exchange Commission, which would have 120 days to review it. The Dodd provisions also would double the net worth or income thresholds for investors to be "accredited."  

Litan argues the 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."

Category:  Capitol Hill