Developing an Angel Network in Montana

In the last year or so, there has been considerable effort to create standardized open source angel investor transaction documents.

Ron is the most prolific angel investor in the business. And also one of the most successful.

Sounds to me like something that got put into the bill without any input from the other side. Now that VCs are loudly raising objections, I wouldn’t be surprised if such changes are stripped — or at least scaled back — in the bill’s final version.

First, Dodd’s bill would require startups raising funding to register with the Securities and Exchange Commission, and then wait 120 days for the SEC to review their filing. A second provision raises the wealth requirements for an “accredited investor” who can invest in startups — if the bill passes, investors would need assets of more than $2.3 million (up from $1 million) or income of more than $450,000 (up from $250,000). The third restriction removes the federal pre-emption allowing angel and venture financing in the United States to follow federal regulations, rather than face different rules between states.

Hidden in the recently proposed Restoring American Financial Stability Act of 2010 are a few provisions that would make it slower and tougher for entrepreneurs to connect with angel investors.

Litan says the provisions "are both unnecessary and unhelpful at a time when policymakers should be looking for ways to make it easier to finance new businesses, especially the potentially high-growth, job-creating companies capable of attracting outside investors."

Senator Dodd proposes adjusting for inflation the income and net worth requirements for a person to be considered an "accredited investor" by the Securities & Exchange Commission. This benign-sounding change would dramatically reduce the number of accredited informal investors financing companies in the U.S. today.

Not surprisingly, the National Venture Capital Association and the Angel Capital Association oppose Dodd’s proposed changes – arguing that they would drain the angel investor pool at a time when seed-stage capital is already at a premium.

"We experienced our strongest year ever in terms of dollars flowing to entrepreneurs, even in the midst of a severe downturn," Alliance chairman, Dan Rosen, said in the release.

In fact, couples investing may be the trend, as Liz Marchi, fund coordinator for the Frontier Angel Fund in Whitefish, MT., and coordinator of the Montana Angel Network, suggests.

"We encourage couples to be involved together in the process and have found that creates a good culture of inquisitiveness," notes Marchi., though she touts the talent individual women bring to her group.