August 21, 2013
I have been an active angel investor since 2001, have been Chairman of Tech Coast Angels, one of the largest angel groups in the country, and serve on the Board of Directors of the Angel Capital Association. During this time, I have personally invested in more than 25 companies that in turn have generated thousands of jobs. However, there have been more failures than successes, and in total I have more loses than profits. My reaction to the new rules is that at a minimum they will increase the costs and difficulties of fundraising for early stage companies, thus raising the already high odds that that these companies will fail. That is especially unfortunate for our economy as a whole, since studies have shown that most economic growth comes from new startup companies.
Personally, I have decided that if these new rules take effect in their current form I will retire from angel investing. I am not making a lot of money doing this, and the prospects of overall returns going down in the future is not attractive. While my decision to withdraw will have an insignificant impact on the roughly $20B that angels invest every year, I think many others will come to a similar conclusion. These new rules could thereby devastate the angel investing ecosystem, and in turn have a significant negative effect on economic growth and job creation in the US.