There has been a bit of an uproar recently concerning Senator Dodd’s financial regulatory reform bill and its adverse effects on startup companies and angel investors. Traditionally, seed capital can be raised from those deemed by the federal government to be “accredited investors” without much fuss from the SEC or State security regulators.
Under the new reformatory bill, however, a filing must be made with the SEC even if all of the investors are “accredited”. The SEC will have 120 days to review the filing, and if that time lapses without review, the security will then be subject to review by the applicable State securities commissions.
Moreover, the bill increases the qualification of an “accredited investor” from one with a net worth of $1 million to one with a net worth of $2.3 million, and from $200,000 of annual income to $449,000 ($674,000 for joint annual income with a spouse).
Business Week reported that this change would lower the number of individual accredited investors by 77%. Yikes!
If this bill passes, not only will the pool of angel investors be dramatically reduced, but the cost and time associated with angel financing will increase substantially. This will likely hurt entrepreneurs, decrease the number of new business ventures, and adversely affect job creation.
For a more in-depth discussion of the bill and the goals lawmakers are hoping to achieve, check out this article at TechFlash. If interested in voicing your opposition, take a minute to sign this petition.