Fred Wilson blogged this morning about the bad policy in Senator Dodd's financial system regulatory reform bill that would make it harder for startups to raise seed financing from angels. Fred put it in the context of public policy concerns generally that impact startups, including immigration reform, software patents, net neutrality and open spectrum.
I'll [William Carleton] just speak here to Dodd's bill. As currently drafted, Dodd's bill would hurt seed financing for startups in two ways: (1) it would require the SEC to raise the net worth and income level thresholds needed to meet the "accredited investor" definition, and (2) it would end federal preemption of "all accredited" offerings, so that every state in the country would be permitted to regulate such offerings, even though they already met the federal requirements. See this post on Seattle 2.0 for a good overview of the current law and how federal preemption of state law in this area makes sense. Suffice it to say here that Dodd's bill, as written, could knock many angels out of the startup ecosystem, and would certainly greatly increase legal fees and costs for financings (perhaps even make modest seed financings not do-able at all where investors may be from different states).
Bendis agrees with William Carleton"s Position that raising the SEC "Accredited Investor" definition would reduce the number of angel investors in America, and reduce the number of early stage financing's for promising high risk, high growth entrepreneurs that are already dealing with a significant funding "Valley of Death and are dependent on angels to fill the Venture Capital void. Bendis recommends that NASVF, ACA, NASBIC and NVCA all work together on educating members of Congress, regarding the financing challenges in the U.S. and unless the Federal Government intends to address the Valley of Death, everyone needs to do more to encourage accredited angel investors to continue thier investing in entrepreneurial small businesses, which are critical to creating jobs and helping America recover from this economic recession.