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]

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: 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.

By: Marianne Hudson, ACA Executive Director

This post originally appeared on 

Two industry powerhouses - America Online Co-Founder Steve Case and former Hewlett-Packard CEO Carly Fiorina - made a splash recently when they led a report, “Can Startups Save the American Dream?

I very much like this report from the University of Virginia’s Miller Center and the ideas in it. However, they missed a significant piece of the answer. While the report focuses on how entrepreneurs can kick-start the economy, it overlooks what we need to do to support the angel investors who fuel the entrepreneurs creating our country’s jobs and innovations.

The contribution of angel investors is huge. Angels have backed some of the most important companies in America including Facebook, Google, Amazon, Twitter and Starbucks. Angels supply nearly 90 percent of outside equity to startup companies, after friends and family.  In 2013 angels invested nearly $25 billion in about 71,000 companies in every state. Without angel investors, many of these companies would not be around.

In case you haven’t heard, the SEC will revisit the definition of accredited investor soon and there is a possibility the financial thresholds could be raised so much that 60 percent of all accredited angel investors would no longer qualify to make angel investments. If this happened, this would have a huge impact on the high-growth startups that create the majority of jobs and innovations in this country.

We need angels, entrepreneurs, and all parts of the startup ecosystem to let the SEC know how important it is to keep the angel capital pool large and healthy. ACA has created a set of letter templates and other information so you can easily write the SEC and other policy makers. Check out our “Protect Angel Funding” web page for all details.

At issue is the potential for the SEC to raise the financial thresholds for individual accredited investors for inflation – so net worth requirements could increase from $1 million to $2.5 million and annual income thresholds could grow from $200,000 per to about $450,000. By the SEC’s own estimates, about 60 percent of households would no longer meet accredited investor requirements with the net worth increase alone. 

Want to find the best deals? The best exits?  Curious about syndicating on accredited platforms? How about getting answers to your questions about the new SEC rules on general solicitation and what you really need to do (from the SEC and from leading attorneys)?  Want to rub shoulders with some of the best and most successful angels in the world?

The world of angel investing is changing dramatically. To stay current with today's proposed rules and trends - and to hear from the best in the business, plan to be in Washington, DC March 26-28 for the 2014 ACA Summit - Angel Impacts:  Entrepreneurial and Economic Success.  (You can register here.)

We're inviting the media with lots of great stories about how angels support startup companies with passion, experience and funding. In 2012 angels invested nearly $23 billion in about 67,000 ventures. Read more about what reporters will be writing about here.

We hope to see you at the Summit, where hundreds of angels will gather to help determine the future of angel investing!  You will definitely bring home ideas you can implement immediately.

Dan Rosen is a Board member of the Angel Capital Association, the world’s largest organization of accredited investors, and is also chairman of the Alliance of Angels, a Seattle-based angel investment group.  To read the original post on VentureBeat, click here.

On July 10th, the Securities and Exchange Commission released rules allowing entrepreneurs to publicly advertise their investment opportunities, finalizing a portion of the JOBS Act of 2012. These included a final rule lifting the ban on general solicitation and provided guidance on how issuing entrepreneurs could “reasonably” verify their investors are accredited; a final rule disqualifying “bad actors” from investing in private offerings; and a proposed rule requiring entrepreneurs to submit multiple reports and information for solicited offerings. The Angel Capital Association (ACA) has taken a strong stance on these rules, stating that these rules could greatly reduce entrepreneur access to angel investment, as they require investors to provide their private wealth or income information to issuers or third parties, and also may require entrepreneurs to submit considerable information to the SEC with harsh penalties for missing filing dates.

David Verrill is Chairman of the Angel Capital Association and also leads the Hub Angels Investment Group in Boston.  He wrote an Op-Ed in the Wall Street Journal today on the SEC General Solicitation Rules.

Last week's SEC ruling on General Solicitation sounds an alarm to angel investors in the US on several grounds. But first, a quick summary of the ruling. Rule 506b keeps regulations as they are for those companies who only privately solicit funds from self-certified qualified investors. No harm there, and thanks to the SEC for maintaining the status quo for what has been historically the best way for startups to raise money from accredited angel investors.

The problem is with the new 506c rule, which puts the issuer (CEO of a startup, hedge fund manager, venture capitalist) on the hook to take “reasonable steps” above and beyond the self-certification questionnaire to verify accreditation of an investor if the issuer generally solicits that investor. The definition of what constitutes being generally solicited is extremely broad, including anything public, such as an event or appearing on a Web site. Herein lies rub #1. Much of the deal flow for my angel group comes from events and activities that could well be considered a "public" forum. Think about the accelerators (TechStars Demo Day), business plan contests (MIT $100k, MassChallenge events), or even the portals (Gust) that all have mechanisms of communicating with their various audiences that makes them likely subject to the 506c requirements. These critical members of the startup ecosystem are very important sources of quality deal flow for angels (and VCs). In order to avoid any question of whether or not 506 b or c would apply, an issuer might play it safe and file under 506c because the penalties are severe (like offering your investors their money back, or being banned from raising more capital for a year) if you file for 506b but are shown to have generally solicited. What would you do as a startup CEO?

Last week the Securities and Exchange Commission approved two rules and one proposed rule that will change how entrepreneurs raise angel capital and may make investment more difficult for angels and startups alike. We think fewer angels will invest as a result, unfortunately hurting the startups that create jobs throughout the U.S. 

The issues are complex, but here is a quick summary:

1. The SEC is lifting the ban on general solicitation for startups raising capital under Regulation D Rule 506(c) – as required in last year’s JOBS Act – and providing rules on how issuers take “reasonable steps to verify” that all investors are accredited.

Here’s the important thing for you to understand: for solicited deals, angels will no longer be able to self-certify their accredited status. Instead issuers will need to verify accredited status with “safe harbor” categories such as providing the issuer a copy of your W-2, tax filing, or brokerage statement or a third-party (attorney, accountant, or registered investment advisor) certifies that you are accredited. Investors who have previously invested in an issuer will be grandfathered in additional investments in that particular company. The published rule is here.

The Angel Capital Association is making a difference in Washington. For the past 24 months, the ACA has made a concerted effort to make sure we take the voice of angel investors to Capitol Hill. A special fund was initiated to help cover the expenses of that effort, our Public Policy Committee put together an all-star volunteer cast of some of the best legal minds on the planet (like Joe Bartlett of Sullivan & Worcester in NY), and we engaged a lobbying firm called APCO Worldwide to help us maneuver our way through the halls of Congress. And it has paid off already.

The initial call to arms came in 2010 when Congress, influenced by North American Security Administrators Association, proposed changing the rules on private company filings (so-called Reg D Filing) that would have made it difficult,


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