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Worst...written...article...EVER! This is the point (found 2 pages or 954 words down the article) "There are three changes that should have a particular effec

by SamAtt 16y ago

Worst...written...article...EVER! This is the point (found 2 pages or 954 words down the article) "There are three changes that should have a particular effect on angel investors, a catch-all category which includes everyone from friends and family members who invest in a startup, to unaffiliated wealthy individuals, to side investments made by venture capitalists acting on their own. "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." He also makes the point that registering with the SEC is expensive ($100,000+ in legal fees) and that he believes the "accredited investor" limits will be raised even further. The rest of the piece is just filler. (for anyone down voting this let me point out this article goes on for 9 printed pages and doesn't even explain who benefits from these clauses. That's just bad writing)

vishaldpatel 16y ago
So umm.. who wins if these limits are successfully put in place?
- david927 16y ago
  Something like this: http://www.me-vc.com http://www.me-vc.com
  - SamAtt 16y ago
    I'm sure that company will too but on a larger scale I think Banks win. Angel Investors compete with small business loans and generally win since small business loans require you start paying them back right away where as angel investors just take a piece of the company. So if Angel investments become prohibitive it will force wannabe entrepreneurs into the waiting arms of the banks.
    - jacquesm 16y ago
      Angel investors do not typically compete with small business loans because these companies would not in a million years get money from a bank. Angels invest exactly in those that can not get money from banks because they are too high risk. Once a business is established and has a balance sheet with some assets on it you can start thinking about applying for a regular loan. For small businesses at the 'start-up' level it would be great if they had access to bank loans for their needs, since borrowing from a bank is much cheaper long run than from an angel (after all, the bank does not take equity, only interest). Has anybody here ever gotten money from a bank based on a non-existent business?
      - SamAtt 16y ago
        I'm sorry but you're just wrong here. This is the first link that comes up on Google when you search for "Small Business Loan": http://www.merchantloans.com/ http://www.merchantloans.com/. The first item listed under that heading is "Start/buy a business or franchise" This About.com article (http://sbinfocanada.about.com/cs/financing/a/getbusinessloan.htm http://sbinfocanada.about.com/cs/financing/a/getbusinessloan...) starts by saying... "Sooner or later most small businesses need to get a small business loan, whether to get the operating capital for business startup or to finance an expansion. " Small Business Loans are the #1 way that people start businesses in this country (no one Angel invests in a hot dog stand)
        jacquesm 16y ago
        Yes, but hot dog stands are not the kind of things that we're talking about in this context. High tech, high risk start ups typically do not walk in to their bank managers office to get a few tens of thousands up to 100K loan to start their business, they're lucky enough to get an appointment in the first place. Banks like to borrow where there is collateral, a typical tech start up will invest in people and a little bit of hardware. Typically that hardware will be worth 0 if the company should fold. A hot dog stand can at least be sold to the next guy that wants to try his luck. Angels not investing in hot dog stands prove my point, they don't detract from it. Banks will gain if they get more business because of this, since angels do not invest in to that kind of business the banks already have it, and the kind of investment that angels do will not be touched by banks. Do you personally know of a high tech business that got its first capital from a bank ? Do you know of a high tech business that got its first capital from an angle or more than one angel investor ? For me the score is exactly 0 for the first and 20+ for the second. (where I know one or more of the founders personally)
jbooth 16y ago
Yeah, I read a solid 2 pages of hyperbolic claims about how "devastating" this will be and how important angels are and how they're great and everything before I gave up on learning any actual facts and clicked back here. Thanks for the summary. How does the bill define "startups", for one? I'm perfectly capable of believing there will be regulations which have adverse unintended consequences on startups from this bill but that sounds extremely onerous -- is that for IPOs, only? I'd actually agree with that. If it's for raising seed money or anything up through a series C, I'd disagree, very strongly in the case of earlier rounds. The article doesn't tell us which it is, though.
- anamax 16y ago
  > is that for IPOs, only? IPOs were "hurt" by Sarbanes Oxley, the reaction to Enron. (No, there's nothing in it that would have affected Enron.) > If it's for raising seed money or anything up through a series C, I'd disagree, very strongly in the case of earlier rounds. The article doesn't tell us which it is, though. While that article may not have provided every piece of information that you'd like, Google is your friend. Above I quoted the relevant section AND provided a link.
gojomo 16y ago
Worst...written...article...EVER! Though you found this via a blog post, its origin is an opt-in weekly investors newsletter. That newsletter isn't written to make quick points to hurried drive-by readers following links from social news sites. Its primary audience is its regular readers, familiar with Mauldin's discursive style, slow build, and combination of multiple topics in one letter. He's providing a mind-meld, not a cliff's notes bullet list. It's good for his intended audience. I hate to see valuable things criticized in absolute global terms ("worst... EVER") when in fact the criticism is really relative and local ("bad for my purpose of the moment"). For all its benefits, the web makes this problem worse -- because it's so easy to link/excerpt/republish/retitle removing the original context.

by SamAtt 16y ago

vishaldpatel 16y ago

So umm.. who wins if these limits are successfully put in place?

david927 16y ago
Something like this: http://www.me-vc.com http://www.me-vc.com
- SamAtt 16y ago
  I'm sure that company will too but on a larger scale I think Banks win. Angel Investors compete with small business loans and generally win since small business loans require you start paying them back right away where as angel investors just take a piece of the company. So if Angel investments become prohibitive it will force wannabe entrepreneurs into the waiting arms of the banks.
  - jacquesm 16y ago
    Angel investors do not typically compete with small business loans because these companies would not in a million years get money from a bank. Angels invest exactly in those that can not get money from banks because they are too high risk. Once a business is established and has a balance sheet with some assets on it you can start thinking about applying for a regular loan. For small businesses at the 'start-up' level it would be great if they had access to bank loans for their needs, since borrowing from a bank is much cheaper long run than from an angel (after all, the bank does not take equity, only interest). Has anybody here ever gotten money from a bank based on a non-existent business?
    - SamAtt 16y ago
      I'm sorry but you're just wrong here. This is the first link that comes up on Google when you search for "Small Business Loan": http://www.merchantloans.com/ http://www.merchantloans.com/. The first item listed under that heading is "Start/buy a business or franchise" This About.com article (http://sbinfocanada.about.com/cs/financing/a/getbusinessloan.htm http://sbinfocanada.about.com/cs/financing/a/getbusinessloan...) starts by saying... "Sooner or later most small businesses need to get a small business loan, whether to get the operating capital for business startup or to finance an expansion. " Small Business Loans are the #1 way that people start businesses in this country (no one Angel invests in a hot dog stand)
      - jacquesm 16y ago
        Yes, but hot dog stands are not the kind of things that we're talking about in this context. High tech, high risk start ups typically do not walk in to their bank managers office to get a few tens of thousands up to 100K loan to start their business, they're lucky enough to get an appointment in the first place. Banks like to borrow where there is collateral, a typical tech start up will invest in people and a little bit of hardware. Typically that hardware will be worth 0 if the company should fold. A hot dog stand can at least be sold to the next guy that wants to try his luck. Angels not investing in hot dog stands prove my point, they don't detract from it. Banks will gain if they get more business because of this, since angels do not invest in to that kind of business the banks already have it, and the kind of investment that angels do will not be touched by banks. Do you personally know of a high tech business that got its first capital from a bank ? Do you know of a high tech business that got its first capital from an angle or more than one angel investor ? For me the score is exactly 0 for the first and 20+ for the second. (where I know one or more of the founders personally)

jbooth 16y ago

Yeah, I read a solid 2 pages of hyperbolic claims about how "devastating" this will be and how important angels are and how they're great and everything before I gave up on learning any actual facts and clicked back here. Thanks for the summary. How does the bill define "startups", for one? I'm perfectly capable of believing there will be regulations which have adverse unintended consequences on startups from this bill but that sounds extremely onerous -- is that for IPOs, only? I'd actually agree with that. If it's for raising seed money or anything up through a series C, I'd disagree, very strongly in the case of earlier rounds. The article doesn't tell us which it is, though.

anamax 16y ago
> is that for IPOs, only? IPOs were "hurt" by Sarbanes Oxley, the reaction to Enron. (No, there's nothing in it that would have affected Enron.) > If it's for raising seed money or anything up through a series C, I'd disagree, very strongly in the case of earlier rounds. The article doesn't tell us which it is, though. While that article may not have provided every piece of information that you'd like, Google is your friend. Above I quoted the relevant section AND provided a link.

gojomo 16y ago

Worst...written...article...EVER! Though you found this via a blog post, its origin is an opt-in weekly investors newsletter. That newsletter isn't written to make quick points to hurried drive-by readers following links from social news sites. Its primary audience is its regular readers, familiar with Mauldin's discursive style, slow build, and combination of multiple topics in one letter. He's providing a mind-meld, not a cliff's notes bullet list. It's good for his intended audience. I hate to see valuable things criticized in absolute global terms ("worst... EVER") when in fact the criticism is really relative and local ("bad for my purpose of the moment"). For all its benefits, the web makes this problem worse -- because it's so easy to link/excerpt/republish/retitle removing the original context.