
Finance Reform Bill would severely throttle angel investment - jolie
http://mashable.com/2010/05/13/finance-reform-startups/
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jquery
I think we need to pass the bill to find out what's in it. The time for debate
is over. Anyone against this bill is for the status-quo. Our country cannot
afford any more delays or deception. If you oppose this financial reform bill
you are probably a racist.

EDIT: I was being facetious :)

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Gormo
Does this concept of "accredited investor" exist under current law in the US?
The article seems to imply that it does. If so, does it apply to both equity
and debt funding?

I've never heard of such a thing, or any kind of legally-imposed qualification
requirements for one private party to lend/give money to another. If this
exists and is enforced, I'm astonished that it hasn't attracted a great deal
of outrage.

The article also talks about SEC involvement in auditing startups. What
authority does the SEC have to intervene in a business that isn't publicly
traded? What if I'm seeking private funding for a startup that I have no
intention of ever taking public? And even if I do at some point decide to go
public, how would the SEC become involved before I start planning my IPO?

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_delirium
The concept does exist, and is essentially an exception to some of the normal
securities laws: if you offer stock only to accredited investors, you're
exempt from some of the registration/reporting requirements, on the theory
that those requirements are intended primarily to protect non-sophisticated
investors, so are unnecessary if you have only sophisticated investors. See:
<http://www.sec.gov/answers/accred.htm>

Nobody's actually _prevented_ from accepting non-accredited investors, but if
you do, you have to comply with the registration/reporting requirements, which
many startups don't want to do.

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Brushfire
I was at the ACA meeting last week, and the consensus was that things are
going to change, but they wont be this radical. They have an amendment that is
currently going through committee that takes out some of the absurdities of
this (SEC oversight, etc). We'll see what happens.

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stretchwithme
Congress needs to be severely throttled.

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david927
The best way to fight this is to render it impotent.

If anyone is interested in working on this, let me know: <http://me-vc.com>

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petercooper
What's the difference between an "angel" investor and "begging from friends"?
I mean I appreciate the difference, but why couldn't you put together a deal
with an "investor" as if they were just a friend or acquaintance? Do
accredited investors get any benefits your friends and family would not?

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anamax
> What's the difference between an "angel" investor and "begging from
> friends"?

There is no difference.

> I mean I appreciate the difference, but why couldn't you put together a deal
> with an "investor" as if they were just a friend or acquaintance?

You don't understand. There's nothing special about friends and acquaintances.
If you're taking money from folks, there are certain rules. The rules are a
lot tighter for taking money from ordinary folk than they are for accredited
investors. (Close family might be a third category - friends aren't.)

~~~
_delirium
There are some differences depending on whether you have a "pre-existing
relationship" and whether you openly advertise. So under current law, at
least, your uncle offering you $10k is different from putting up www.please-
fund-us.com that solicits some random person you've never met to give you
$10k.

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DanielBMarkham
It's really frustrating the way these huge bills get created. You might have
20% good ideas, 20% toss-outs to the PACs that elected you, 20% earmarks, 20%
total crap, and 20% unknown.

Is a bill like that worth voting for? You can pitch it as solving a huge
problem, being an indication of rampant corruption, making progress in a key
social or political movement, being a vehicle for bringing money to your
state, or being a terrible mistake. Fact is, it could be all of these. Then
congressmen can use legislative tricks to both vote for and against the same
bill, effectively rendering any kind of simple debate meaningless. Which is
the exact reason why it's constructed the way it is.

I think in terms of startups, this is the worst bill I've seen in years. And
while I'm sure professional Angel organizations are all on top of the changes
and such, we need to be moving in the exact opposite direction than this bill
is taking us. I think real reform is needed, but I am deeply worried that the
underlying theory here -- that market risk can be managed by committee or
legislation -- is deeply flawed. Adding to that structural problem I have is
all of these other really bad tack-ons, like giving the FDA more control over
the vitamin and supplement business.

Bad. Bad. Bad.

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jacoblyles
The only part of your post that I disagree with is that the bill has 20% good
ideas.

If the federal government really wanted to discourage excessive risk-taking in
the financial marketplace, why doesn't it allow people who make bad bets to
lose money? The market offers free financial "regulation" called "losses".

Instead, the feds bailed out bondholders of large financial institutions at a
rate of 100 cents on the dollar. They bailed out counterparties who took out
insurance contracts from insolvent firms. They bailed out the unions that
killed the very companies they worked for. They gave $billions in handouts to
homeowners who bought a house that they couldn't afford.

And what happens to the prudent people who didn't make bad bets? They get to
pay taxes to bail out the imprudent people. Thrift is punished and
recklessness is rewarded.

Then after the fact the feds pass some anti-capitalist bill that they can
trumpet in the press that does more harm than good. The feds micromanage the
economy in an attempt to prevent the effects of the incentives created by
their own past actions.

It's all highly irrational.

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hga
It's very rational for the politicians ladling out the money ... until they
"run out of other people's money", to paraphrase Margret Thatcher.

