Which of the thousands of startups funded by the 12,000+ members of the Angel Capital Association (ACA), the world's leading professional association for angel investors, will win the coveted Luis Villalobos Award?  It will be one of these three just announced finalists: ActX (Seattle), GroundMetrics (San Diego), and RetroSense Therapeutics (Ann Arbor, MI).  These companies will be honored and the winner will be announced in a special awards ceremony on April 15th at the world’s largest gathering of angel investors, the 2015 ACA Summit taking place in San Diego. The award is named in memory of Luis Villalobos, who angel investors nationwide admired for actively investing in and mentoring ingenious, creative and innovative startups.

“These finalists are at the top of their game and represent the pinnacle of startup innovation and ingenuity,” said ACA Executive Director Marianne Hudson. “Each company is representative of the strong leadership driving the type of innovation that ACA’s 12,000+ angel investor members look for when selecting companies to financially support and mentor.”

By: Ken Kousky, BlueWater Angels and Krista Tuomi, American University

Angel tax credits are a common policy measure aimed at boosting startups. They are relatively simple and cost-effective for states, and can result in high quality job creation. Credits can also be more effective than a capital gains tax reduction in stimulating early stage companies, since investors get the credit up front whether the investment realizes a gain or not.[1]  Currently 27 states have some form of early stage capital tax credit, the mode being 25% of invested capital.[2] 

It appears that the credits do actually spur new investment as opposed to just rewarding existing investors.  In a report by the Minnesota Department of Revenue, 48% of surveyed angels would not have made their investment without a 25% credit and 34% would have invested less. The Minnesota figures are bolstered by a survey of angels, conducted by Tuomi and Boxer in 2014. In this survey, 69% of respondents claimed that the credit influenced them to invest in more firms or invest more money. Some of this private capital may be displaced from alternative investment in the state, but it is likely that much of this would have been otherwise placed in national capital markets.[3]

By: Marianne Hudson, ACA Executive Director

The SEC unanimously approved a new rule, dubbed “Reg A+,” on March 25th.  The rule allows companies to raise up to $50 million from the general public in unregistered public offerings, building on a part of the JOBS Act passed by Congress in 2012.  Issuers may begin using this rule in about 60 days.

Many ACA members have asked what Reg A+ means for angels and the early stage investing community, especially given some blogs and media stories with a wide variety of interpretations.  This post provides basics about the new rule, and ACA is following up with two activities:  a special breakfast briefing at the ACA Summit on the new rules, led by law firm Reed Smith and ACA’s policy advisory council of attorneys is preparing a deeper information piece for ACA members.

By: Bill Payne, Frontier Angels

The popular press has been hyping crowdfunding since the JOBS Act passed in 2010.  The Huffington Post tells us that the #1 Losers of the JOBS Act is Angel Investors!  AngelList and Kickstarter (and their facilitated companies) are getting considerable attention and Lending Club had a huge IPO in December.  Just how large is this crowdfunding movement in the US?  And, how is it impacting seed stage and early stage investing which has been dominated by angels for the past several decades?

During the past several months, I have been on a mission to quantify the several types of crowdfunding, both in the US and the rest of the world.  We hear crowdfunding exceeded $10 billion worldwide in 2014.  But, how much of that was equity crowdfunding?  In the US, all equity crowdfunding is accredited investor only.  What can we learn from Europe about the quantity of unaccredited investor (public) crowdfunding, compared to all other crowdfunding? 

**This post originally appeared on "The Hill" on March 3, 2015.**

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.

The conversation around implementation and rulemaking of the Dodd-Frank Financial Reform legislation, which became law in 2010, has been focused on issues such as margin requirements for derivatives, bans on proprietary trading (the Volcker Rule) and other bank centric capital standards. Lost in the debate is a little known part of the legislation which requires the United States Securities and Exchange Commission (SEC) to revisit the definition of an accredited investor. A change in this industry wide definition could have drastic impact on capital formation, start-up growth, and ultimately American jobs.

By: Elizabeth Usovicz, General Manager of Transaction Commons, as part of a series she writes for ACA aimed at entrepreneurs, "Your Pitch is Just the Beginning."

As an entrepreneur, you live for that big idea that blends innovation, an untapped market and high growth potential.

It’s been said that ideas are the currency of the 21st century, and like all currencies, the value of a big idea can fluctuate. Some days, you can’t seem to find the discipline to execute. Other days, you’re distracted – a competitor surfaces, a strategic relationship falters or a regulatory issue becomes a setback. Your business focus vanishes and distraction takes over, keeping you up at night and making you miserable by day.

By: Bill Payne, Frontier Angels

Entrepreneurs seem genuinely surprised to find that investors in Peoria or Little Rock are not willing to invest in startup companies at Silicon Valley prices.  After all, they just read in TechCrunch that investors funded a company similar to theirs at an $8 million pre-money valuation! 

The valuation of startup companies shouldn’t be impacted by location, should they?  Guess again!  A newly-constructed 3500 square foot home with a pool near New York City is priced well above a similar home in Fargo, right?  Well, the same differentials are true for startup companies.  In fact, the issues that influence residential real estate pricing are quite analogous to those which determine the price investors will pay for ownership in startup companies.

ACA Membership Director Sarah Dickey interviewed Ellen Weber recently as part of a series of ACA member profiles.

Meet Ellen Weber – ACA member angel investor, Executive Director of Robin Hood Ventures and Executive Director of the Temple Innovation and Entrepreneurship Institute. Ellen provides insight into how the 16 year old angel group maintains its edge for investing in dynamic markets.

How and when did you get involved in angel investing?

Robin Hood was founded when two long-time friends attended a local pitch event with little structure and no follow up.  They wanted to create an angel group that would not only get deals done as effectively as possible, but would also work closely with the entrepreneur after investment.  I agreed to help them start this new angel group with an initial role of serving as the back office to get things off the ground. Very quickly my role grew and I also became very active in the local entrepreneurial community. 

By: Jeff Solomon, CPA, CVA, Managing Partner, Katz Nannis + Solomon, PC

Early stage investors are often asked to sit on boards, and many sets of investment terms require that outside investors sit on the key board committees.  But what’s involved in being on an Audit Committee, and how do you do it right?  Let’s take a look at examples of an effective working relationship with the auditor and the types of questions you should be asking your auditors when you meet to add value to the governance process and to the company you represent:

By: Ken Kousky, BlueWater Angels and Krista Tuomi, American University

Federal and state governments are beginning to recognize the important role that startups play in job creation. (A recent article by Neumark, Wall, and Zhang notes that they account for almost 20 percent of gross job creation.) For these startups, early stage financing is increasingly necessary given the shortened product life cycle - businesses can only succeed by moving rapidly from ideas to product distribution.  Banks do not provide this type of funding; family and friends rarely have enough; and the public stock market is only an option for established firms. The 2014 Joint Small Business Credit Survey Report emphasizes this. In particular, it finds that the majority of small firms (under $1 million in annual revenues) and startups (under 5 years in business) are unable to secure any credit. (The average approval rate from all sources was only 38%). Not surprisingly, lack of credit availability was the top listed challenge for startups in 2014.

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