Serving as the voice of the North American angel community, the Angel Capital Association is pleased to bring you our Angel Insights Blog, featuring commentary on startup investment trends, the latest on public policy affecting entrepreneurial investment, and other topics top of mind to active accredited investors.
We encourage you to participate in the discussion.
By: Chris McCannell, director of APCO Worldwide’s Washington DC financial service practice and government relations. He has over 15 years of Capitol Hill experience working for Members of Congress on the Financial Service Committee and the tax writing Ways and Means Committee. He and his colleagues have been ACA’s registered lobbyist for the past two and a half years. Chris is an active participant in ACA’s programming including national events like this week’s Leadership Workshop.
While Congress went back to their states and Congressional Districts for the month of August, members of the Angel Capital Association (ACA) took advantage of their Senators and Representatives being back home to engage on public policy issues important to angel investors and start up enterprises.
As the 113th Congress comes to an end, there are three top government relations priorities that ACA is promoting. First is a review by the Securities and Exchange Commission required under Dodd-Frank to review the definition of an individual accredited investor. Consumer advocates as well as state securities commissioners have promoted indexing the current definition to inflation which would limit the number of people who would be able to join angel groups and invest their money in start-up investments. Second is continuing rule making from the JOBS Act on what constitutes general solicitation. Bi-partisan legislation has been introduced in the House and Senate to exempt demo days from the general solicitation definition. Third and final is continued support for Section 1202 of the tax code which gives a 100% exemption of capital gains taxes to qualified investments in start-up businesses. This exemption expired at the end of 2013 and needs to be re-extended by Congress to affect investors in 2014.
By: Elizabeth Usovicz, General Manager of Transaction Commons
You’ve reached out to a big player in your market space – one with distribution clout and an A-list customer base. They’ve agreed to meet with you. What are your next steps?
All too often, entrepreneurs leave these first meetings in the hands of the big fish – and lose the opportunity. Here are three steps to setting the tone for your first meeting.
By: Christopher Mirabile, ACA Board and Launchpad Venture Group
This post originally appeared on Inc.com
Why does it seem like angel investing received more press coverage in the last few years than in its first few hundred years combined? Private investing has suddenly become part of mainstream consciousness.
What’s going on? It’s more than just an academic question. As an active angel and co-head of one of the largest and busiest U.S. angel groups, I’ve watched and charted these market changes since the early 1990s.
In just a couple decades a handful of seismic forces affecting early-stage financing have combined to make angel investing a very different business. The result? Angel investors have become a serious source of capital for savvy high-growth entrepreneurs.
Seven key trends have fueled this radical transformation.
ACA, our members and other thought leaders in early-stage investing continue to put out great articles about investing, industry sector trends, and public policy. Many of these are useful to investors, entrepreneurs, and the many professionals in the startup ecosystem.
Check out the articles below that interest you:
By: George Bittlingmayer, professor of finance at the University of Kansas and member of Mid-America Angels
This blog post originally appeared as a column in RealClearMarkets
The startup scene in Kansas City has grown by leaps and bounds in recent years, mirroring the upswing in cities nationwide. In fact, the big, welcome news of the last decade is that tech innovation hubs have expanded beyond Silicon Valley to cities from Austin to Pittsburgh and Boulder to Nashville. Unfortunately, those new, thriving ecosystems of entrepreneurs, incubators and early-stage investors may soon hit a headwind blowing in from Washington, D.C.
Angel investors, the first and often crucial providers of funding for high-growth startups, provided $24.8 billion in growth capital last year, not too far behind the $29.6 billion that came from venture capital. While the overall amounts are similar, angel investors play a distinct role, typically funding businesses earlier and with smaller amounts per company.
Editor’s note: Get to know John Huston and other ACA members via periodic ACA member profiles. If you have a great idea for this feature, please contact Sarah Dickey.
What should angels expect during the 2014 ACA Leadership Workshop in your hometown of Columbus September 17-19?
This meeting will be a great opportunity for angels to take their craft to the next level and to see the thinking and opportunities available in the Midwest. I am convinced this is the best agenda we have ever had. I am extremely excited to have angels from throughout the North American ACA membership to fly in to Columbus and fly out energized. I am particularly looking forward to the kickoff by Mark Kvamme, of Drive Capital which just raised a $250M VC fund focused on Midwest companies.
By: Daniel N. Zucker and Jeffrey C. Wagner of McDermott Will & Emery
This blog post originally appeared in Venture Experts
Included in the American Taxpayer Relief Act of 2012 (ATRA) are provisions that extended some of the more significant benefits of Internal Revenue Code Section 1202, the Code provision that permits eligible noncorporate taxpayers to exclude from taxable income (within limits) a specified percentage of any gain from the sale or exchange of “qualified small business stock” (QSBS) held for more than five years. That percentage, which, when Section 1202 was first enacted in 1993, was 50 percent of the recognized gain from the sale of the QSBS, was increased to 100 percent of such gain for QSBS acquired after September 27, 2010, and before December 31, 2010. The 100 percent exclusion was extended through December 31, 2011, pursuant to the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. ATRA retroactively extended the 100 percent exclusion for QSBS acquired in 2012 and 2013. More importantly (to some), ATRA also extended the rule that excluded that gain not only for regular income tax purposes but for alternative minimum tax (AMT) purposes as well.
With speed approaching perilously close to that of light itself, recent deregulation has freed huge and heretofore inaccessible pools of private monies to fund new investment and unshackle innovation.
Just kidding – that didn’t happen. Would have been nice, eh? One could argue it wasn’t for lack of good legislative intention. As part of the JOBS act – Congress did indeed instruct the SEC to remove the ancient prohibition against General Solicitation and Advertising under Regulation D. The concept: make it easier for start-ups to cast a wide net when seeking investors. You may recall good ol’ Reg D which provides exemptions from SEC registration. The Reg D exemption relied on by most private investors – now called 506(b) continues the solicitation ban. The new exemption since last September – 506(c) – eliminates the ban but not without a new gotcha of its own.
By: Marianne Hudson, ACA Executive Director
In recognition of the importance of innovative startups, several Congressmen and Senators have established Startup Day Across America, as a way to celebrate and meet with startup companies while they are in their home states and districts. This is a great time for ACA members to contact their Congressmen and suggest they visit a portfolio company or attend an angel roundtable. The official day is August 5th, but any day in August
More and more Congressmen and Senators understand the importance of innovative startups to America’s economy, and some are also noting how angel investors support these job creators. I believe it is important to grow that understanding in our legislators and encourage ACA members to reach out to your US Representatives and Senators to meet with you and your portfolio companies during their August recess – many of them really enjoy talking with their constituent entrepreneurs and investors! Such a meeting can also bring local media attention to your angel group and portfolio companies, if you choose to promote it.
By: Eric Liu, PHD/MD student at the University of Oxford
Editor's Note: Eric Liu is a DPhil student in Medical Oncology at the University of Oxford. Last year he served an internship at ACA member Life Science Angels, where he had a front seat in medical entrepreneurship and also provided valuable work for the angel group. Since his angel internship he has taken an internship with the Head of Global Strategy and Regulation of Bayer Healthcare. He highly recommends internships for young healthcare entrepreneurs, as you can see
from his enthusiastic story.
Entrepreneurs that successfully utilize innovations shape much of our society today, making our lives a better place in an ever more challenging environment. With an aging population and skyrocketing healthcare bills globally, many healthcare entrepreneurs are using their brilliant minds to help address some of the most unmet medical needs.