A U.S Capitol Thumbs up for…Early-Stage Capital.

Jonathan Ortmans, President, Public Forum Institute

Washington has been busy on several fronts important to entrepreneurs these past few months.  One we must not forget to reflect on is the recent U.S. Senate approval of a bipartisan-sponsored amendment to the financial reform bill that protects against creating new barriers for high-growth entrepreneurs seeking to raise angel capital. This “Angel Amendment” addressed two of the original provisions in the bill that had the potential of creating regulatory obstacles for entrepreneurs raising angel financing and weakening the pool of angel capital by reducing the number of accredited angel investors.

More specifically, the amendment that passed eliminated the language in the bill requiring a 120 day Securities and Exchange Commission (SEC) review period for investors that prove an annual income in excess of $200 thousand and net worth totaling more than $1 million. The incentive embodied in this language could have proven harmful for the availability of seed investment, which is already difficult to attract. Angel capital is essential to entrepreneurial start-up activity in the United States. Angel investors are high net worth individuals who make high-risk equity investments directly into growing companies, usually as the ventures are starting up. A 2007 Kauffman study revealed that the majority of angel investments between 1990 and 2007 were mostly made on seed or start-up firms, with nearly 45 percent of the investments in companies that had no revenues at the time of the first investment. This contrasts the trend among venture capitalists, who are estimated to invest less than 2 percent in seed and start-up companies. Angels thus fill an important void. Not surprisingly, the bipartisan “Angel Amendment” was strongly supported not only by early-stage actors such as the Angel Capital Association and the Association of University Research Parks, but also by those who usually enter the entrepreneurial scene at later stages of the growth of young businesses, such as the National Venture Capital Association, the North American Securities Administrators Association, and the Private Equity Council.

In a political environment where we are trying to put the economy back on a growth track, we must be careful not to harm our job creators – our young businesses. The numbers speak for themselves. As recently as 2007, two-thirds of the jobs created were in young firms. Capital is a critical component of their success and just like with any aspect of entrepreneurship, access to early-stage capital depends on maintaining an enabling environment.  Angels, who are often former entrepreneurs themselves, also bring value to new firms through mentoring and industry connections.

As supporters of high-growth entrepreneurship, we will continue to monitor the regulatory world for policies that could represent thickets of anti-entrepreneurial incentives.  We will also pause and acknowledge when legislators get it right. 


Jonathan Ortmans is president of the Public Forum Institute, a non-partisan organization dedicated to fostering dialogue on important policy issues. In this capacity, he leads the Policy Dialogue on Entrepreneurship, focused on public policies to promote entrepreneurship in the U.S. and around the world. In addition, he serves as a senior fellow at the Kauffman Foundation. 

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