Early-Stage Landscape

By: Mark Graffagnini, Cara Stone, LLP, ACA Public Policy Advisory Council Member

The Investment Company Act of 1940 (the “ICA”) defines an “investment company” as any issuer which “is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities.” This definition generally includes angel funds, venture capital funds and other types of private equity and hedge funds, unless an exemption applies.

By: Marianne Hudson, ACA Executive Director

ACA and angel investors celebrated victory this week at our nation’s capital as the bill to solve the “99 Investor Problem” passed the House of Representatives on Tuesday, May 22.  The resolution to the 99 investor problem is part of S.2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, which focuses on reducing the regulatory burden on community banks by rolling back Dodd-Frank regulations.  Included in the bill is a provision to raise the cap on the number of investors in angel funds and syndicates from 99 investors to 250 in funds of $10 million or less.  This piece of legislation passed with 258 votes, 33 Democrats voting in favor, so somewhat bipartisan.  The bill was signed by the President on Thursday, May 24, making it law (probably pending rule-making).

By Lucy Howell, ACA Director of Partnerships 

The ACA Summit is the largest gathering of accredited angel investors in North America and the event’s “Innovation Showcase” provides selected companies the opportunity to present their pitch to the entire ACA Summit audience.  It represents a tremendous opportunity for angel groups, economic development agencies and accelerators to showcase their best portfolio companies and attract capital. 

Twenty-three sponsored entrepreneurs delivered their Showcase speed pitch to the audience throughout the Summit.  Sponsored entrepreneurs also hosted a table throughout the Summit to tell their story and hold private meetings.  This year ACA partnered with Gust Launch as a sponsor, which offered winning underwriters complimentary licenses to help their entrepreneurs incorporate and grow.

By: Marianne Hudson, ACA Executive Director

I thought you would be interested in a handy summary of the tax reform bill, the Tax Cut and Jobs Act, which was signed into law by the President just before the Christmas holiday.  It is by Bloomberg Government and was done before some small tweaks by the Senate, but should be pretty close to the final law.

There are three things to know about tax reform that affect angel investors and new companies, most of which ACA supported and promoted on Capitol Hill:

By: Marianne Hudson, ACA Executive Director

ACA members have known for years that people from other countries make AMAZING entrepreneurs.  This is one of the main reasons ACA has supported policies like startup visas and the International Entrepreneur Rule to ensure that more of these entrepreneurs from other countries can stay in the US and create innovative and job creating companies.

Now we have a new source of data on international entrepreneurs – Immigrant Founders of the 2017 Fortune 500 – by the Center for American Entrepreneurship (CAE).  The report comes amid the ongoing debate about US immigration policy – and, most immediately, debate regarding the policy known as Deferred Action for Childhood Arrivals (DACA).

By: Marianne Hudson, ACA Executive Director

Recently two articles caught my attention for calling attention to the importance of startups to national economies, with one particularly pointing out how key angel investors are.  Both writings point to how startups create jobs and innovations to our economy and they are the kinds of articles that Members of Congress and other policy makers read.  (That helps ACA make progress on Capitol Hill, trust me!)

Below are both articles with some excerpts so you get the general idea.  Check out the full articles too.

By Linda Smith, ACA Chair

Angel Ventures is spreading its wings!  For those of you unfamiliar with Angel Ventures, they are the widest network of angel investors in Latin America with a significant presence in Mexico, Columbia, Peru, Chile and Southern California.  Some of you may have met Hernan Fernandez of Angel Ventures Mexico, an active ACA member. They also maintain excellent contacts with Hispanic angels and Hispanic investment opportunities throughout the United States. 

As your ACA Chair, I recently had the opportunity to travel south and meet with the staff, supporters, and members of Angel Ventures Peru.  Based in the capital city of Lima, I was hosted by Greg Mitchell who leads the staff in Lima and Elizabeth Acuna, their deal flow manager.  The breadth and depth of their work in the startup ecosystem is truly impressive.  With over 250 members, Angel Ventures has created a fund-to-fund network of investments. 

By: Marianne Hudson, ACA Executive Director

All of us know about — or personally know — talented foreign-born entrepreneurs who have created successful businesses in the US.  Think Intel, eBay and Tesla. Immigrant entrepreneurs are behind more than half of America’s startup companies valued at $1 billion or more.

That’s why the Angel Capital Association is joining the National Venture Capital Association (NVCA) and many other leading entrepreneurial organizations to support the International Entrepreneur Rule.

By: Marianne Hudson, ACA Executive Director

Every day, ACA members ask us for ideas on how they can improve everything from deal flow to impact to liquidity.  Other members have fantastic ideas and experience in solving those same issues.

So let’s say you are part of an angel group that has lost some of its mojo and you’re losing out on the very best entrepreneurs because of newer players in your startup ecosystem.  These investors have innovative ways to fund companies and have deep connections into the leading entrepreneurs, innovators and follow-on investors.  What do you need to do to be innovative and not only bring a fresh take to your entrepreneurial community, but also regularly help great startups grow with these investors?

By: William Carleton, Counselor @ Law, and volunteer chair of ACA Public Policy Advisory Council

Don't look now, but entire development teams, with significant experience (2-3 years+) working together, are leaving giant tech companies to found startups.

If 20 years ago the archetype was two renegades in a garage with an idea and the will to figure stuff out, today's paradigm is six or seven developers and a political savvy business leader (or two, or more) who have learned to trust one another and work effectively as a unit. All courtesy of the experience of shipping products for a well funded, publicly traded company.

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