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Senator Dodd Reform Bill Could Ruin Angel Investing

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Re: Senator Dodd Reform Bill Could Ruin Angel Investing

#11

Post by jbooth »

hga wrote: post #6
jbooth wrote: post #3

If someone's going to make this case, could they please do so from somewhere without a paywall and if at all possible, from a source who's logic is more honest than "are republicans or democrats in office right now"? IF the claims are correct though, then that needs to be fixed in the bill, particularly the part about filing with the SEC.

Second source??? These provisions of Dodd's bill have been discussed extensively on Hacker News: http://www.google.com/search?q=dodd+site%3Anews.ycombinator.... And I think you underestimate the significance of the editorial board of The Wall Street Journal taking a strong position on this issue in a house editorial.

The Wall Street Journal's opinions are driven entirely by which political party controls Congress.

After 8 years of the "deficits don't matter" administration, all of a sudden these guys turn into budget hawks 1 month after Obama inherits their fiscal situation. They're against quote "socialized" healthcare even though the bill didn't socialize anything that wasn't already a government program.. but the more expensive Medicare Part D program was just ducky with them. Etc, etc etc.

I have no problem believing there are problems with the bill that would accidentally affect startups. But if we're talking pithy 2-sentence characterizations from a source with a history of partisanship? Citation needed.

Re: Senator Dodd Reform Bill Could Ruin Angel Investing

#13

Post by DanielBMarkham »

I am amazed at the things people find important enough to take action on -- or not.

Seems to me, just guessing, can't be sure, but a bill that has these things in it should be the #1 item on HN, and we should be organizing as a community to stop it. I don't care what your politics are, this is a political thing that needs to be stopped.

Parallel Haskell is awesome and all, and goodness knows I want to hear more about Apple and Flash, or linux, or iPads, or Adobe, or browsers, or Jon Stewart's jokes last night, but this is real, live stuff that could impact anybody with a startup.

If the Philadelphia news ran a story "Philly on fire!" people would come out to try to put the fire out. HN runs a story "VC investing seriously challenged!" and you can hear the crickets chirp.

Re: Senator Dodd Reform Bill Could Ruin Angel Investing

#14

Post by grellas »

Congress has not been friendly to startups this past decade.

A few results of their well-intended efforts:

1. Startups today have little or no realistic hope of gaining liquidity through an IPO, leaving them in a position where M&A is their only realistic exit, with the result being that valuations are lowered for founder exits (the consequence of Sarbanes-Oxley, among other new laws).

2. Startups today can't simply price their stock based on the reasonable business judgment of a board of directors, nor can they use a simple 10 to 1 ratio in pricing their preferred versus their common stock, but must instead incur significant expense in having to do independent outside appraisals just to take simple steps such as issuing stock options (the new 409A statute and accompanying regulations have brought this about).

3. The VC market has been all but dead for the past two years, owing in no small part to congressional actions that helped fuel the Fannie/Freddie subprime mess, leading to a financial meltdown.

4. Add to this the hammer that is about to fall on angel funding as reflected in the Dodd bill, and startups will not only have their VC funding sources largely dried up but will have far more restricted access to early-stage funding across the board. In practical terms, this will mean that funding activities will need to be based on: (a) having access to comparatively wealthy angel investors (maybe 25% of the current pool) while being prepared to incur significant delays in getting funds pending a minimum 4-month wait; or (b) relying on Section 4(2), which is the section of the 1933 Securities Act that offers an exemption from registration for private placements but without benefit of the safe-harbor approach of Regulation D and its rules relating to accredited investors (the equivalent of "walking on the high wire without a net").

Maybe any given point above is over-simplified or overstated but the broad pattern is clear. No individual item is ruinous but each contributes to costs and restricts options. It is not a good trend for startups.

Re: Senator Dodd Reform Bill Could Ruin Angel Investing

#15

Post by yummyfajitas »

patio11 wrote: post #12

Have I missed a runaway profusion of investment scams targeting people with net worths between 1 million and 2.3 million? The perceived need for this just perplexes me.

Something must be done. This is something. Therefore, we must do this.

Re: Senator Dodd Reform Bill Could Ruin Angel Investing

#16

Post by fthead9 »

Wow, the economy is stumbling and the only way out is innovation and now they are trying to make it harder to start a company. Just how do they propose we get the economy back on track? Sorry printing more money is not a long term solution to economic recovery. It amazes me that our elected officials have zero grasp of how the economy works. These are supposedly educated people and yet they consistently treat the economy like some grade school battle for teacher's pet honors. Sorry for the rant but crap like this makes me question the viability of our current governing system.

As @rmaccloy I'm not against the idea of bank reform but these types of provisions and attachments to bills are causing so much waste and then we wonder why we have such a huge deficit.

Re: Senator Dodd Reform Bill Could Ruin Angel Investing

#17

Post by hga »

jbooth wrote: post #11
hga wrote: post #6

Earlier quoted context omitted.

Second source??? These provisions of Dodd's bill have been discussed extensively on Hacker News: http://www.google.com/search?q=dodd+site%3Anews.ycombinator.... And I think you underestimate the significance of the editorial board of The Wall Street Journal taking a strong position on this issue in a house editorial.

The Wall Street Journal's opinions are driven entirely by which political party controls Congress. After 8 years of the "deficits don't matter" administration, all of a sudden these guys turn into budget hawks 1 month after Obama inherits their fiscal situation. They're against quote "socialized" healthcare even though the bill didn't socialize anything that wasn't already a government program.. but the more expensiv…

http://blog.heritage.org/wp-content/uploads/obama_budget_def...

Re: Senator Dodd Reform Bill Could Ruin Angel Investing

#18

Post by DanielBMarkham »

yummyfajitas wrote: post #15
patio11 wrote: post #12

Have I missed a runaway profusion of investment scams targeting people with net worths between 1 million and 2.3 million? The perceived need for this just perplexes me.

Something must be done. This is something. Therefore, we must do this.

Look! I did something! It looks good on TV and 98% of the voters are not directly hurt by it.

Looks good, gets votes, it is good.

Re: Senator Dodd Reform Bill Could Ruin Angel Investing

#19

Post by jbooth »

hga wrote: post #17
jbooth wrote: post #11

Earlier quoted context omitted.

The Wall Street Journal's opinions are driven entirely by which political party controls Congress. After 8 years of the "deficits don't matter" administration, all of a sudden these guys turn into budget hawks 1 month after Obama inherits their fiscal situation. They're against quote "socialized" healthcare even though the bill didn't socialize anything that wasn't already a government program.. but the more expensiv…

http://blog.heritage.org/wp-content/uploads/obama_budget_def...

Hang on, I mention the fact that WSJ is hopelessly biased, and you respond with a link to an even more biased source?

Ok, let's back up and try to engage your brain for a second. So you have a set of 10 year projections there. Those are predictions about the future. With me so far?

Now think about what they were on January 15, 2009 as opposed to January 25, 2009.

Do you think that the act of Obama taking office changed the future and mandated a ton of future government spending? Or do you think these might be fundamentals that we were going to have to deal with regardless?

For bonus points: How much of those future deficits would you guess have to do with the increasing cost of healthcare?

And I'll leave out entirely what they might look like if we hadn't just endured 8 years of studied fingers-in-the-ears idiocy from the Bush administration. Remember that surplus in 2000?

Heritage and WSJ are concerned about deficits. Who did they support in 2000 again?

Re: Senator Dodd Reform Bill Could Ruin Angel Investing

#20

Post by [deleted] »

DanielBMarkham wrote: post #13

I am amazed at the things people find important enough to take action on -- or not. Seems to me, just guessing, can't be sure, but a bill that has these things in it should be the #1 item on HN, and we should be organizing as a community to stop it. I don't care what your politics are, this is a political thing that needs to be stopped. Parallel Haskell is awesome and all, and goodness knows I want to hear more about…

[deleted]
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