As Published in the Huffington Post 04/05/10
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The Fine Art of Angel Shooting
President Obama bet his legacy on the American people’s ability to innovate and create so the US remains the most vital and creative nation in the history of the world. He seeks transformation in four areas: clean energy, internet and communications, health and medicine, and (as he will address next week in Florida) catalyzing a new commercial space industry.
Meanwhile, in his zeal to regulate the devils of Wall Street, fellow Democrat, Senator Christopher Dodd, Chairman of the Senate Banking Committee, is about to kill the most vital and exciting part of the American economic miracle in all of these areas – startups.
Getting an idea from laptop to market is scary and tricky at the best of times. It is literally the art of creating something from nothing. As one successful Silicon Valley entrepreneur said, “it is the most exciting and the scariest” moment in one’s life. You are betting everything on yourself, your idea, your plan, your sweat and your ability to make it all happen. And if it is a good idea, you can bet somebody somewhere in the world is also working on something similar – so being able to get funding and get to market fast is critical.
And thus from out of the heavens descend your angels. Aptly named, Angel investors are the first ones in when it comes to taking a great idea and starting a company. If small business startups are the engine that pulls us into the future, if entrepreneurs and their ideas are the fuel that powers the engine, then angel investors are the sparkplug that ignites the idea and turns their potential energy into forward motion. The first ones who believe in you and your idea, the first to lay their own funds on the line, they are often your friends and family, but also include those with wealth outside of your circle – people who don’t know you and you have to work even harder to impress – for all of them the last thing you want is to make investing more complicated than it already is.
The changes hidden in the Dodd bill have entrepreneurs and angel investors scared to death. Some call them “insane” and will “destroy Silicon Valley” let alone the other fields I mentioned. The odd thing is that although Wall Street is a true scandal of epic proportions, the main street investment world is a resounding success, with relatively few issues, and certainly not in the areas this bill purports to “fix.” It is as if someone from another country got into the bill writing process and came up with a way to sabotage the American creative dream machine.
Here are the killer clauses:
- Startups must register with the Security Exchange Commission, then wait 4 months minimum for its review – a lifetime in the fast moving world of startups. (Keep in mind you and your employees are living hand to mouth everyday without pay.)
- Accredited investors (who can legally invest in startups) would be limited to those with assets over $2.5 million (up from $1 million) or a personal income of $450,000 (up from $250,000). This knocks mom and dad and uncle Bill right out of the game. How many multi-millionaires in your family and close friends?
- Removing the federal pre-emption providing a single set of national regulations and forcing startups to deal with state-by-state variations in rules. Most startups are kitchen table corporations. We have no money to pay lawyers to figure things out for us. That’s why we are looking for funds in the first place. Duh!
These plans may well be someday seen as the death knell of American leadership in the world. They will choke off innovation and wealth creation at exactly the time the president is trying to kick start it by smothering the vitality of what needs to be a dynamic and open area of creativity, while actually denying many in the middle class the chance to get involved at the ground level of any future MicroSofts or Boeings.
This is not an academic abstraction for me. I founded a startup a few years ago. We produced the world’s first commercial suit from drawing board to working prototype for less than NASA pays for one glove. This kind of innovation is exactly what the President is betting on to lower costs to taxpayers and create a new space industry here in the US. And I know my brothers and sisters out there in energy, medicine and communications are cranking out such innovations themselves everyday. But we need money, we need simplicity and we need to be able to move fast. The last thing we need is the helping hand of big brother aiming a gun at us and those who would help us change the world.
Please don’t shoot the angels Mr. Dodd, we need them to lift us into the future.