May 4, 2010

Update on Senator Dodd’s Proposed Bill

We recently published a blog post which addressed Democratic Senator Chris Dodd’s proposed financial reform bill. We discussed some aspects of this bill and the possible negative effects it could have on angel investing in the United States, including more than doubling the net worth threshold for accredited angel investors to $2 million and requiring lengthy filing processes with the SEC.

The Senate began debating Dodd’s proposed legislation last week. According to an article in the Denver Business Journal, Dodd will personally offer amendments “that will allay most concerns” felt by angel investors and entrepreneurs alike. The first amendment keeps the investor worth threshold at $1 million, but will now exclude the value of the investors’ home. The second would eliminate the need for angel investments to be subject to different state regulations (which would make angel investments time-consuming and expensive for entrepreneurs).

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Much of the Senate’s discussion thus far has been centered around preventing future economic crises as well as tax-payer-funded government bailouts. According to an article in Bloomberg Businessweek, “staff for Dodd . . . and Alabama Senator Richard Shelby, the banking panel’s top Republican, are close to completing a joint amendment to address Republicans’ concerns that Dodd’s bill doesn’t do enough to prevent future bailouts, according to a Senate aide familiar with negotiations. Part of the compromise will be to remove a provision in Dodd’s measure that would have created a $50 billion industry-supported fund to pay for unwinding a failing systemically important financial firm”

The same article addresses other amendments being proposed during this process:

  • Senator Jim Webb (Virginia, Democrat) offered the amendment to impose a one-time, 50 percent tax on bonuses of more than $400,000 paid to executives of financial institutions that got at least $5 billion from the $700 billion Troubled Asset Relief Program Congress approved in 2008. It would apply to income generated for work in 2009 and paid in 2010.
  • Senator Kay Bailey Hutchison (Texas, Republican) wants to preserve the Federal Reserve’s powers to oversee small banks.  This would eliminate a provision in Dodd’s bill that shrinks the central bank’s jurisdiction to the 36 banks with more than $50 billion in assets (including Goldman Sachs and Morgan Stanley).
  • Senator John McCain (Arizona, Republican) wants to eventually dissolve government-backed mortgage-finance companies Freddie Mac and Fannie Mae.
  • Senator Ben Cardin (Maryland, Democrat) submitted an amendment to provide protections for whistle blowers who work for Moody’s Investors Service, Standard & Poor’s and other credit-rating companies.

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The bill is expected to be completed by the end of the week, and we’ll keep you informed of any major changes that happen between now and then.  For now it looks like, for the most part, the voice of the investor and entrepreneurship communities have been heard and taken into consideration.




April 21, 2010

What Does Senator Dodd’s Proposed New Bill Mean for Angel Investing?

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We all know how important angel investing is to startups and to the economy in general.  According to the University of New Hampshire’s Center for Venture Research, just last year some 256,480 angels invested $17.6 billion in 57,225 different entrepreneurial ventures – and that was during a down economy.  Without their help, it would be extremely difficult for new ventures to get off the ground, considering funding from banks and other sources is harder to come by than ever before.

There has been a lot of talk lately of a new bill being proposed by Democratic Senator Chris Dodd of Connecticut.  The bill, introduced in March, has provisions that could diminish angel investors’ power and make it more difficult for entrepreneurs to find funding for their big ideas.  With our present economy, this is a big step in the wrong direction.  We need angels more than ever to create jobs and help us move forward.

An article published on VentureBeat.com highlights some of the biggest changes affecting angel investing:

“First, Dodd’s bill would require startups raising funding to register with the Securities and Exchange Commission, and then wait 120 days for the SEC to review their filing. A second provision raises the wealth requirements for an ‘accredited investor’ who can invest in startups — if the bill passes, investors would need assets of more than $2.3 million (up from $1 million) or income of more than $450,000 (up from $250,000). The third restriction removes the federal pre-emption allowing angel and venture financing in the United States to follow federal regulations, rather than face different rules between states.”

The article also has a quote from Chris Sacca, an angel investor and former Google employee.  He said that “while 10 years ago it may have taken years to build a company, companies are now built in a matter of weeks. So this 120-day waiting period is frankly ridiculous. I have companies with tens of thousands and hundreds of thousands of users that are built in a matter of weeks. They’re generating actual dollars of revenue, creating jobs, investing in real estate office space, capital equipment, etc. If they had to wait 120 days to actually apply for the ability to obtain financing it would absolutely just crush that market.”

You can read more about it here or sign a petition against it here




November 20, 2009

Online SpeedPitch Connects Entrepreneurs to Investors

Yesterday FundingUniverse held another Online SpeedPitch event.  This event gives entrepreneurs from all over the country the opportunity to pitch their ideas to active investors via an online presentation.  The investors can view the presentation, ask questions, and contact companies that they are interested in.

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Click above to see a sample Online SpeedPitch

Yesterday’s event was a huge success!  We had four companies and 15 investors in attendance.  All four of the companies received interest from at least two investors.  One of the presenters even received interest from six investors!

We will continue to hold these events and hope you will consider being a part of the next one!  Events are listed at www.fundinguniverse.com