ACA Policy Platform

For 2010, ACA has set a federal public policy platform that focuses on five key issues:

• Balanced tax incentives

• Education, training, and awareness

• Keep angel investment in private hands

• Maintain the standards and regulations for accredited investors

• Consider leveraging private investments

1. Balanced tax incentives

ACA members favor a combination of low capital gains taxes in truly early-stage businesses (15 percent or less) with a tax credit to catalyze more investments in innovative start-up businesses. Low capital gains taxes are often cited as a key reason for the growth in angel investment in the past decade and tax credits have been used by more than 20 states to increase the flow of capital to entrepreneurs.

2. Education, training, and awareness

To grow the number and quality of active and accredited angel investors throughout the United States, it is important to ensure that investors have access to the best information and best practices to make good investments and support their portfolio companies. High quality education can enhance the capabilities of angel investors, potential angels, university leaders, and support professionals that help the small businesses that need equity investment.

3. Keep angel investment activities in private hands

A few recent initiatives and draft legislation have recommended the establishment of government offices to oversee angel investment. ACA believes that such intervention would not have the intended results, and would instead reduce the amount of angel capital available to the start-ups that need this type of capital.

4. Maintain the standards and regulations for accredited investors

Abruptly increasing the threshold of net-worth required for accredited investors for this particular asset class activity could have potentially detrimental impact seed stage funding in the United States. This is particularly true given the significant drop in the number of high net-worth individuals in 2008 and 2009. Perhaps one of our largest concerns is two changes recommended in a large draft 2010 bill on Financial Reform: one that would increase requirements to meet the accredited investor standard, decreasing the potential pool of angel investors, and another that would allow states to create their own regulations for securities offerings, likely making it difficult to syndicate investments across state lines. ACA co-authored a letter with NVCA on this important issue in March, 2010.

5. Consider leveraging private investments

If simple, non-bureaucratic techniques of directing federal funds to co-invest with angel groups could be developed, entrepreneurs may more easily access the funding they need and angels may be more easily able to diversify their investments in this risky asset class. Several examples exist in American states and countries.

Additional details about these recommendations and more background are available in 2009 Congressional testimony by ACA.