Monday, March 29, 2010

The Finance Reform Bill is Horrid for Startups and Angel Investors

Have you been following the posts about Senator Dodd's Finance Reform bill?

Especially the two provisions that will seriously effect early stage investing and having all new companies file with the SEC.

The first attempts to move the criterion for being an accredited investor from someone with a net worth of $1M or greater, to having a net worth of $2.3M. "Hello? McFly?" Um, the economy goes down and the qualifications go up? That's Washington Brilliance right there! Isn't it obvious that this will seriously reduce the number of accredited investors and make seed capital more difficult for entrepreneurs to acquire?

Angels suffered the same net worth reductions back in 2008 both in terms of home value and cash on hand to invest with. I'm not a betting man, though I'd wager that this requirement would reduce the Angel ranks 35% to 50%.

The second proposed provision would require each company, seeking outside investors, to file with the Securities & Exchange Commission first or be required to potentially register with each state they will be raising capital in. This will add additional time and needless busy-work.

CEO Space helped it's members raise over $3 Billion last year, in just 5 meetings in 2009 when banks and venture capital sat on the sidelines with their hands in their pockets. The number would have been far less, in my opinion. Just last week, a tremendous amount of deal-flow was also put on the table in the first of 5 sessions this year.


Perhaps the most glaring - and most obvious question is, "What do these two provisions have to do with Banking Reform?" Another good question is, "Since there really doesn't seem to be a direct connection, why is Senator Dodd including is his Finance Reform Bill that allegedly is focused on keeping banks from taking the kinds of risks that got us in trouble in 2007 & 2008"? Is there really something else going on here? Is Senator laying the groundwork for what he will do after he is out of office? Is there some lobbying group that would like to see these provisions as law? I say, "Follow the Money trail on this one!

Of course, the Commodity Reform Act, unanimously passed during the waning minutes of the Clinton Administration was certainly a fishy one as well. Bernhard Dorhmann, of CEOSpace has pointed this out in his CD entitled, "What happened how can we

Has anyone explained to Dodd how important new business creation is to our long stability? More than 50% of all jobs in our country are attributed to Small Business. Is this the time to mess around with an area of economic development that stimulates job creation?

Perhaps Dodd should come forward and explain why he thinks these provisions are important and how they'll help our economy grow! I encourage you too, to write your Senators and Representative to see if they are brave enough to speak up, and - if you've same questions as I have, you should get your elected officials to do the same.


This bill in working it's way through the Senate. It is far from being passed. This is why it is so important to call attention to it and get these provisions thrown out early. Contact your Congressmen & Senator!

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