Why Is Dodd’s Banking Bill Messing With Venture Funding?
Typical – a bill that’s supposed to be about banking reform throws in some new rules about startup funding that have nothing to do with banks. The two provisions, which seemed designed to keep anyone near the middle from having any chance of being an angel investor in a startup:
1) Changing the definition of a “qualified investor” in angel and venture deals. Not just anyone can invest in a startup company. You have to be a qualified investor. A qualified investor is currently defined as anyone with a net worth of over $1mm or net income of over $250k. Dodd’s bill would increase that to $2.3mm and $450k respectively. And then index those numbers to inflation.
2) Eliminate the existing federal pre-emption over state regulation of “accredited offerings.” Angel and venture financings could be regulated state by state creating a fairly burdensome set of rules and regulations that each financing would need to be subject to. Currently there is a federal pre-emption that makes getting these kinds of deals done fairly easy.
I’d call it surprising, but Democrats have time and time against proven themselves to be about as anti-small business (in policy, not in rhetoric, where they love to put the small businessman on a pedestal when it serves their cause) as Republicans are anti-gun control.