Financial Reforms May Hit Angels and Startups

An article in USA Today raised an issue that may challenge a lot of angel investors and startup companies looking for venture funding. The new financial reform legislation introduces some regulations that to me seem unnecessary and out of place. The bill requires angel investors to have minimum net worth of $2.3 million (previously $1 million) and annual income of $450K (previously $250K). Also, the startups will have to register with the Securities and Exchange Commission and undergo review for 120 days before getting their initial venture capital investment. Lastly, the private offerings will be regulated by the states, thus increasing the startups’ exposure to bureaucracy and conflicting regulations.  
 I find it interesting, how the reform that intends to prevent banks and large financial institutions from gambling investors’ money away can lose focus and possibly endanger the existence of the startups and the innovation they could bring. The restriction on angel investors’ net worth and income will considerably limit the doors on which newly spawned business ideas could knock for venture capital funding. Also, I am sure that the additional bureaucracy and lawyers’ fees resulting from the SEC registration and the state regulations will turn to be equally de-motivating to the entrepreneurial spirit. Fortunately, the bill is still under review, so let’s hope that the necessary revisions will be done.