Angels are individual, sophisticated investors who put money into new and emerging businesses. This is good because most job growth comes from small enterprise. Sometimes, though, it’s a trick to get angel money to move, especially in a down economy. One way is through tax credits. Minnesota currently has no angel tax credit, but we have the best shot we’ve had in years in getting one passed.
In fact, both parties and Governor Pawlenty are in favor of the angel tax credit. In the state legislature, Sen. Kathy Saltzman and Rep. Jim Davnie are supporting angel tax credits. Meanwhile, Rep. Ann Lenczewski is working to address the issue with legislation that provides for grants in lieu of tax credits (this bill, HF2580, is already filed in the House). For the Pawlenty administration, Minnesota Revenue Commissioner Ward Einess is currently leading the charge.
Here are five good reasons to hope these efforts succeed:
(1) Credits move money - available risk capital for new ventures has dramatically shrunk over the last 18 months. Tax credits are a way to incentivize the movement of risk capital. No available risk capital = new enterprises dying before they're born (or shortly thereafter).
(2) Angels provide expertise - getting a sophisticated investor connected to a startup is a big leg up for the startup. You're getting $ and brainpower.
(3) Angel money is important - not all companies can be bootstrapped or financed from friends and family. Banks are in lockdown. VC's are typically above $1M in investments. So we need angels for the critical $50K-$500K often needed for critical company growth.
(4) Money follows money - angels often follow fellow angels when making investment decisions - let's grease the pipeline.
Cross your fingers. With any luck, Minnesota will have a winter gift for budding enterprise in the state. Let's get it done.
More from Ernest Grumbles III
Common sense: Photo cop is a cost-effective way to reduce red light violations that indisputably impose unnecessary risk of injury to persons (like children, pedestrians, other drivers) and property. The Legislature should revive the proposed law that will let Minnesota join the 26+ other states that have photo cop.
Fall is a great time to check in on our innovation economy. Here are a few recent and upcoming innovation action highlights from MN (and beyond).
What if you could launch your startup through social media-driven fundraising? Well, with the new federal JOBS Act, to be signed into law this Thursday, you'll be able to.
It's going to be an amazing year for MN startups, both in idea generation and funding. Lots of industries in disruption mode. Be part of the story.
The America Invents Act made a number of significant changes to U.S. patent law, some to harmonize U.S. practice with foreign practice, others to improve the patent examination process, including for small business, and a few to address some problematic litigation-related issues. A number of the changes require further implementation by the Patent Office. So stay tuned to see whether and how the new provisions actually impact day to day process at the PTO and the rights of our nation's inventors.