Now that health insurance reform is out of the way (sort of), our employees in Washington (that is, Congressional reps and Senators) will surely turn their attention (if not their bipartisan cooperation) to economic stimulus and finance industry reform (get ready for Obstructionist Politics: Round 2).
Among the bits of joy in the financial reform bill proposed by the Senate Banking Committee are new guidelines for individual investors and the startups they support, guidelines that significantly and negatively impact the seed funding ecosystem.
The proposed legislation doubles the measure of net worth or income required for an individual angel investor to be accredited, and nascent companies would be required to climb a mountain of paperwork with the Securities and Exchange Commission then wait up to 120 days for the SEC to review it.
These proposed rule changes throw sand into the gears of entrepreneurship and for what purpose? If capital is not already difficult to come by for startups, this financial reform would effectively evaporate the pool of angel investment. And while the SEC plods its way through filing reviews, time will be killing young businesses.
There are enough laws, regulations, and daily shenanigans to demonstrate that Congress hasn’t a clue about entrepreneurship.
So let’s be clear: entrepreneurship is, and always has been, the driver of the economy. Risk-taking individuals start new businesses, hire employees, create opportunities and build wealth that is often re-invested in local communities. Rather than imposing new regulation that makes these companies stillborn, Congress should be removing obstacles to capital.
Instead, Congress focuses on mega-banks and Fortune 500 companies, unwilling to let these leviathans of business falter. They need to shift their attention and their policy initiatives to the Fortune 500,000 companies that are too small to be allowed to fail. These companies employ more than 100 million people in the U.S. and earn upwards of $22T in revenue each year. Numbers, by the way, that stack up very favorably against the Fortune 500′s worldwide performance data of 24M employees and $9T in revenue).
We rarely use the Guidewire Group pulpit to incite political action, but if you’ve ever cared about an entrepreneur or imagine you might one day start a company of your own, now is the time to reach out to your elected officials and demand these onerous “reforms” be removed from the forthcoming legislation.