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What our members have to say...
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"Things are looking up for me and my business. I have an investment firm from France that is interested in my film "The Desperate Ones". and I am making arrangements to meet with the investors in Hollywood soon. I am still keeping my fingers cross and keeping hope alive. I feel great about this investment firm."
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In Praise of Angel Investors
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Ever heard of Apple, Amazon.com, Facebook, Google, Hewlett-Packard and Twitter? Sure, you have.
Aside from being extremely successful businesses, what do they have in common? They all got early funding from angel investors.
In the first half of 2010, American angel investors pumped $8.5 billion into small businesses, according to the Center for Venture Research at the University of New Hampshire. To be sure, that’s a bundle of cash. But it represented a 6.5 percent decline in angel investing compared with the first half of 2009.
Why the decrease? Angel investors have been bedeviled by the rocky economy. If that trend continues, it could harm creation of businesses and jobs.
We hear far more about big business bailouts and middle-class tax breaks than we do about startup capital. Let’s not overlook the vital role that angel investments play in our economy. And let’s keep in mind that angel funding definitely hasn’t disappeared.
In a 2010 speech at The University of Texas at Austin sponsored by Austin’s Capital Factory, angel investor Naval Ravikant said the American startup scene is witnessing a rise in angel funding. One reason, Ravikant said, is that entrepreneurs “have gained an enormous amount of leverage,” as it’s become “far, far, far cheaper to start a company today than it was a decade ago.”
That’s a promising development for entrepreneurs.
Historically, angel investors have been the major source of seed funding and startup capital for entrepreneurs, according to the Center for Venture Research. As a matter of fact, many of the startups at the Austin Technology Incubator – housed at UT – owe their existence to angel funding.
Two U.S. senators have introduced legislation that they say would give angel investors more of a financial incentive to write checks to cash-hungry startups like those at the Austin Technology Incubator.
That legislation – the American Opportunity Act of 2011 – would provide angel investors with a 25 percent federal income tax credit for their investments in qualified small businesses. Startups in the aerospace, biotech, clean energy, defense, life sciences, nanotech, semiconductor and software transportation sectors would be among the eligible businesses.
The tax-break-worthy capital could come from an individual angel investor, an angel investment network or an angel investment fund.
Under the bill, a small business could receive up to $2 million a year in cash equity that would qualify for the tax credit. As much as $1 million of that could come from a single investor.
The American Opportunity Act of 2011 is sponsored by U.S. Sen. Mark Pryor, an Arkansas Democrat, and co-sponsored by U.S. Sen. Scott Brown, a Massachusetts Republican.
Pryor noted that angel investments led to the creation of 250,000 jobs in the United States in 2009, or about 5 percent of all new jobs that year. Pryor’s proposal could help pave the way for more jobs – and for the next Facebook, Google or Twitter.
Regardless of whether this legislation passes, we should treat angel investors like the economic angels that they truly are. |
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