On Angels Wings

I didn’t see much local discussion of the Wall Street Journal article that came out on March 19th called “On Angels’ Wings” (sub). This article talked about proposed legislation, being led by Earl Pomeroy (D, North Dakota) and Don Manzullo (R, Illinois) and is being supported by the Kaufmann Foundation but has the Angel Capital Association staying “neutral”. This seems to come up each year in some form or another.

The Access to Capital for Entrepreneurs Act proposes to give a 25% tax credit on the front end to accredited investors. As great as this sounds, there are some possible unintended consequences. Some have argued that it will get investors to do less due diligence and invest in worse companies. Screw that – it’s survival of the fittest. If you’re gonna make dumb investments just because you can offset the risk with a 25% tax credit, you’re still throwing away a bunch of money. You’ll learn, or really you should know better already. Others say the government should just stay out of trying to influence how people invest their money. I generally agree with that and think the free market should be able to sort things out.

But this sure sounds good for entrepreneurs and angel investors on the face of it. I’m just wondering what everyone else thinks. Let me know. I need more data.

file under: Blog, Startups