Dodd Bill Attacks Angel Investing?

I haven’t been following the debate over Sen. Dodd’s financial overhaul closely enough to have an opinion on the overall package, but Mike Masnick flags one aspect of the legslation that seems really troubling. Bob Litan explains:

Under existing law, startup companies can raise money easily and quickly from “accredited investors” — individuals with substantial wealth or income. There is no need for the companies or the investors to gain approval from any state or regulatory official.

All of this would change if Section 926 of the Dodd bill is included in any final reform legislation. That section would require, for the first time, companies seeking angel investment to make a filing with the Securities and Exchange Commission, which would have 120 days to review it. This would both raise the cost of seeking angels and delay the ability of companies to benefit from their funding.

The negative impact of the SEC filing requirement would be aggravated by the proposed doubling of the net worth or income thresholds required for investors to be “accredited.”

It’s hard to overstate how important a favorable regulatory climate is to the success of startups. Some of the most important startups have been founded by 20-somethings without the resources to hire lawyers or navigate regulatory bureaucracies. And startups frequently find themselves within weeks of insolvency before they have a big breakthrough. Having a crucial round of funding delayed by four months can be the difference between success and failure. If this description of the bill is accurate (and I have no reason to doubt that it is), this provision would be very bad for the future of high-tech innovation in the United States.

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5 Responses to Dodd Bill Attacks Angel Investing?

  1. Brian Moore says:

    Is there a general perception that angel investors are being taken advantage of by unscrupulous startups that I wasn’t aware of? Because that definitely seems like a really bad idea.

  2. Contemplationist says:

    Unfortunately, unless some heavy lobbying and/or pressure is applied, this seems set to become law. WE MUST DO SOMETHING

  3. Senate Troll says:

    I’m waiting for someone to sue the SEC about Reg D as it stands, much less if it becomes more discriminatory.

    Why should any class of investors be able to invest in a company just because of that investor’s net worth or annual income. Are they supposed to be fucking smarter because they have a trust from the grandparents or some fucking thing?

    This is complete bullshit and unconstitutional. Where does the SEC get this bullshit power in the first place. Why should smart investors who have less than a million dollars in annual income or less than 2.5 million or some other fucking arbitrary number not get to invest in startups, while rich people can? I’ll tell you why. Because the fucking lawyers in the Senate are a bunch of fucking sycophants to the rich people club. The US Senate is the modern monarchy of America. They fill their pockets by pandering to the rich.

    This whole idea that the SEC or these regulations protect unsophisticated investors is the biggest crock of stinking bullshit on the face of the earth. What. We don’t have access to information? Anyone with a fucking computer and a free Google spreadsheet has more than enough tools to decide whether to invest in a startup.

    Fuck DODD. Fuck the SEC. All they are doing is protecting the already wealthy, not helping the average investor. When are Americans going to wake the fuck up and tell their bullshit, monarchist government to fuck off. Fuck off and leave us alone. We don’t need your fucking 1940’s laws to protect us from fraudulent securities brokers. We can do just fine without the help of our fucking US government, you fucking arrogant assholes. Stick with delivering the mail, checking luggage at the airport, and writing check to welfare recipients, you fucking incompetent government hacks.

    Stay the fuck away from me and out of my life.

  4. Contemplationist says:

    Senate Troll

    Absolutely what I feel as well. I’m afraid this kind of bullshit might pass. Are there no angel investor lobbies to help remove this crock of shit from the bill? It may be screwy in a million other ways, but if it doesn’t harm startups, at least we’ll have that

  5. Robber Baron says:

    Senate Troll


    Without Angel Investors, this country would not be one of the leading innovators in the Tech industry today. Its not wealth or status or, really even ideas that give us that position…..ITS FREEDOM! SOmething these ASSHOLES are wrestling away from the American people bit by bit, each and every day. FREEDOM to allow Angel Investors to take a chance on a new idea and help it to come to fruition, FREEDOM to benefit from the rewards, not only the monetary rewards, but the innovation itself that CHANGES EVERYTHING!!! Facebook, Twitter, MySpace, to name a few! NONE of these would have come about if this bill goes into LAW!
    This is absolute TYRANNICAL BULLSHIT!!!

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