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:
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.
While I am sure that Dodd’s bill will force some changes onto the world of startups, I hardly think it will be the venture funding killer that that author claims it will be.
Below are a few of my reasons why I hold a view different than the author
1) The single greatest hurdle to startups is NOT funding but rather knowledge. Nearly all startups have serious gaps in their knowledge base over administrative issues, legal issues, fiscal issues, technical issues, etc. – This is why most angels will demand that the owners fully commit (leave other occupation, etc.) to the business before agreeing to provide any funds (the idea being that without full commitment, the owners will not be able to solve issues outside of their knowledge base)
2) 4 months is NOT a lifetime in a start up. It is a lifetime to those trying to make fast money
3) Most startups receive family money as a gift or in ways probably not directly addressed by the bill.
Etc.
Just my thoughts
1) You've OBVIOUSLY never started or run a business. Until you have, you have no valid opinion.
2) Not having a valid opinion (see point 1), you have no idea what fair rules are.
3) What do you consider a fair or progressive tax? Currently 47% of US households pay $0 federal income tax, and the top 5% of earners pay something like 60% of the bill. Is that not progressive enough for you????
4) That the bills are FATALLY flawed don't matter to you? There are not strong enough words...
SAD.
I am not an expert, but I would tend to agree with the points raised, and would hope that it could be worked into the bill, or refined at a later date.
I did not hear a proposal or suggestion to fix it in the article, it was just negative about the whole thing.
We need electric cars, trains, batteries, solar panels, windmills, nuclear plants - not space suits.
Those will all be made by large companies.
Small companies cannot compete at large-scale manufacturing.
Google has bought about 5 startups this year alone.
Ever hear about Tesla? Small startup that is making efficient cars. Doesn't need to be a Toyota to do so.
"Angel" investors? Investors are ANGELS?
The proper term is "Venture Capitalist" (VC) but we usually called them "Vulture Capitalists".
They are interested in a killing for their rich clients, not in creating businesses or jobs. Their main goal is to hype the company into a lucrative IPO before they sell their shares, a "pump-and-dump" approach. The resulting companies are not viable and go under, like happened in 2000.
"angels" gave us furniture.com
The angel of financial innovation leading anyone anywhere is long dead.
Without a determination of what caused the crisis, one thing is sure.
Dodd's bill does nothing to prevent it from happening again.
The Money System Common
www.economicstability.org
Mr. Tumlinson, I am officially petrified. Obama must be a Kenyan boogeyman.
Poor Mr. Tumlinson has to wait a whole 4 months to take his start up public and entice Wall Street gamblers into buying stock into his 4 month old company. And the SEC wants to force him to show them that he has REAL investors and financial backing to do this. Tsk. Tsk.
I seem to recall a time when those 'angels" were putting all sorts of money with no restrictions into less than 4 month old companies. All you needed was an idea and somebody would give you a million dollars, make your idea a full fledged company and put it on the market for millions of fools to invest in. Then it turned out that your idea was nothing and your company was nothing and millions of folks lost their money and millions of others lost their jobs.
Oh yeah, that was the 1995-2000 Tech Bubble that caused our last recession. Senator Dodd and Obama are such meanies for trying to prevent that from happening again.
Your article has been thoroughly debunked by about ten different economists and regulatory experts already.
With respect, you should leave the interpretation of these things to the experts. You've completely misinterpreted the language of Dodd's bill.
And with respect, someone in your position is most likely making a great deal of money from a largely unregulated Wall Street right at the moment, so you'll pardon us if we find your attack of financial regulatory reform a bit, shall we say, insincere.
Even choking off small business so that big business won't have competition.
Team Obama and the banks already, effectively cut off most lending to small business.
This will just take them one step closer to completion of the kleptocracy that is Obama.
The same analysis applies to the joker who wrote the article above, too.
It has been at least a generation since we have seen any concerted effort by Republicans to pay as we go, despite their campaign lies, election after election, which people like you keep believing even as they are ignoring their promises to address your hot button issues and also robbing you blind.
It was the Republicans who oversaw the massive redistribution of wealth from the middle class to the corporate class. THAT is kleptocracy. It was their judges who made corporations citizens and recently gave corporations the right to infinitely out-spend human citizens when it comes election time.
Dodd is apparently a tool, but the proposed law will be revised. Contact your representatives with your ideas about the changes should include.
Okay, so some provision needs to be made for startups, which I've heard recently that startups not small companies in general, create the most permanent new jobs. The current loose regulation has allowed large entities to make massive leveraged bets against our system and rip us off to the tune of trillions of dollars, and then come back for the bailout. It makes sense to regulate, but to temper that regulation with the usual escape clauses for startups - say less than $5 Million in sales. At that stage they employ 20-50 people and my guess is they are past the Angel startup stage.
Im going to counter this notion by saying we are not even that country currently.
As for hydrogen, the oil companies won't allow it. Period.
Naivete is getting old. Once you discover who owns everything including the important politicians you can start blogging from a reality base.
I would have you contact your politicos and ask them to remove those three clauses that will harm innovation.
Oh, and one more qualification - I founded a start up myself as I don't believe in talking the talk without walking the walk.
The so-called "angel killer" provisions of this bill Mr. Tumlinson is objecting to are aimed at preventing that kind of bubble from happening and bursting again. Heaven forbid us lowly earth bound spirits be protected from irresponsible and corrupt angels.
Most people starting new companies at the small level needing angel investors actually do have a dream. Yes, some may want to grow their firms and sell out, but I know in the field of space entrepreneurs share a dream of a new frontier in space. Stay tuned, you will be hearing a lot more about us.