Thursday, July 17, 2008

Angel Investment Program by the Federal Government -- HR 3567 Bill Proposed

You know you’re getting big when the federal government wants to step in and help you. Here’s a case in point.

The HR 3567 Bill is an amendment to the Small Business Investment Act of 1958. It is currently making its way through Congress and would provide federal funding to angel organizations in addition to creating an office in the SBA to carry out the program. The program would include building a database of angel investors and setting up a matching funds program up to $2M per group.

The Angel Capital Association researched the bill and surveyed the membership as policy advocation for angel investing is now becoming a higher priority based on membership feedback. The survey showed that members found two positives in the bill:

1. Having the office focus on connecting resources of financing (angels) with users (entrepreneurs) may lead to market efficiencies;

2. The office will provide a point of entry at the federal level for angel investors and angel groups to discuss and address other issues related to angel investing.

The survey also revealed two cons to the bill:

1. The bill could lead to a reduction in angel investments because many angels would not want to report their investment activity to the government office;

2. Some question the need for angel legislation when the number has increased from 67 percent since 1999 and angel investments annually total more than $26 billion.

Currently, the ACA does not take a position at this time. Relevant text from the proposed bill is below:

Title III - Angel Investment Program
Section 301 -
Establishes within the Investment Division of the SBA the Office of Angel Investment, headed by a Director, to provide support for the development of angel investment opportunities for small businesses.

Requires the Director to establish and carry out a program, to be known as the Angel Investment Program, to provide financing to approved angel groups. Limits to $2 million the financing to an angel group. Provides a matching funds requirement. Establishes an Angel Investment Fund. Authorizes appropriations.

Requires the Director to establish and maintain a searchable database, to be known as the Federal Angel Network, to assist small businesses in identifying angel investors. Authorizes appropriations.

Requires: (1) the Director to establish and carry out a program to make grants for the development of new or existing angel groups and to increase awareness and education about angel investing; and (2) each grant recipient to report to the Administrator describing the use of grant funds. Authorizes appropriations.

Best regards,
Hall T.

No comments: