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Rick Tumlinson Headshot

Dodd's Bill Is an Angel Killer

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President Obama bet his legacy and the nation on the creativity,
energy and drive of the American people. His entire persona is that of
a man bent on creating a better future, placing the long and short
bets that will insure the US remains the most vital and creative
nation in the history of the world. His faith in American ingenuity
and the abilities of the people to innovate and create fill every
speech he makes. In particular four areas are the focus of his belief
that Americans can lead the world into a brighter tomorrow; clean
energy, communications, medicinal technology and space development. Be
it encouraging the development of a US clean energy industry,
supporting our amazing internet and communications entrepreneurs,
developing new ways to save lives and make Americans healthier at
lower cost, or catalyzing a vital new commercial space industry to
follow in NASA's footsteps and open the frontier to the people, in
each of these areas the president is pursuing initiatives that are
transformative.

Meanwhile, in his zeal to regulate the monster banks of Wall Street,
Senator Christopher Dodd, Chairman of the Senate Banking Committee is
about to kill the most vital and exciting part of the American
economic miracle in all of these areas -- start-ups.

If small business start ups are the engine that will pull us into the
future, if entrepreneurs and their ideas are the fuel that powers the
engine, then angel investors are the spark plug that ignites the idea
and turns their potential energy into forward motion. These are the
folks whose early money propels them upwards and helps their ideas
take off.

Getting an idea from your laptop to market is a scary and tricky
business at the best of times. It is literally the art of creating
something from nothing. It is, as one successful Silicon Valley
entrepreneur once said "the most exciting and the scariest" moment in
one's life. You are literally betting everything on yourself. Your
idea, your plan, your sweat and your ability to make it all happen.
And if it is a good idea, you can almost bet somebody else out there,
somewhere in the world is also working on something similar - so time
and the ability to maneuver through the obstacles in your way and find
early financial help to get you up and running and your product out to
the market as fast as possible is critical.

And thus from out of the heavens descend your angels. Aptly named,
Angel investors are usually the first ones in when it comes to taking
a great idea and starting a company. They are the first ones who
believe in you and your idea, the first to lay their own funds on the
line. They are often your friends and family, but also include those
with wealth outside of your circle - the kind of people who don't know
you and you have to work even harder to impress - and for all of them
the last thing you want is to make investing more complicated than it
already is.

Just the discovery of the proposed changes in the bill now in Congress
aimed at fixing Wall Street has chilled the entrepreneurial and angel
investor communities to the bone. One hears comments that this plan is
"insane" and will "destroy Silicon Valley" let alone the other fields
I mentioned. The odd thing is that although the financial meltdown on
Wall Street is a true scandal of epic proportions, the main street
investment world is a resounding success, with relatively few issues,
and certainly not in the areas this bill purports to "fix." It is as
if someone from another country got into the bill writing process and
came up with a way to sabotage the American creative dream machine by
slipping in a little poison.

Here are the killer clauses:

  • Start-ups have to register with the Security Exchange Commission and then wait 4 months minimum for it to review their filing. This is a lifetime in the fast moving world of start-ups. (Keep in mind you and your employees are living hand to mouth everyday there is no money coming in.)
  • Accredited investors (those who can legally invest in start-ups) would be limited to those with assets of over2.5 million (up from1 million) or a personal income of450,000 (up from250,000). This knocks mom and dad and uncle Bill right out of the game for most entrepreneurs. How many multi-millionaires in your family and close friends?
  • Removing the federal pre-emption which provides a single set of national regulations and forcing companies to deal with state-by-state variations in rules. Most start-ups are kitchen table corporations at first. We have no money to pay lawyers to figure things out for us. That's why we are looking for funds in the first place. Duh!

I am not overstating it when I say these plans may well be someday be
seen as the death knell of American leadership in the world. The Dodd
Bill will choke off innovation and wealth creation at exactly the same
time the president is trying to kick start it by smothering the
vitality of what needs to be a dynamic and open area of creativity,
while actually denying many in the middle class the chance to get
involved at the ground level of any future Microsofts or Boeings.

This is not just some academic abstraction for me. I founded a start-up
just a few years ago. We make spacesuits, and produced the world's
first commercial suit from drawing board to working prototype for less
than NASA pays for one glove. This kind of innovation is exactly what
the President is betting on to lower costs to taxpayers and create a
new space industry here in the US in his latest initiative to hand
over some elements of our space program to commercial firms. And I
know my brothers and sisters out there in energy, medicine and
communications are cranking out such innovations themselves everyday.
Of course we need a fair legal regime, but we need money, we need
simplicity and we need to be able to move fast. The last thing we need
is the "helping hand" of big brother aiming a gun at us and those
financial angels who would help us change the world.

Please don't shoot the angels Mr. Dodd, we need them to lift us into the future.