Supporting America's Innovators Act of 2016
Floor Speech
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Mr. Speaker and Members, this bill, H.R. 4854, is an example of how the two sides can work together. I worked with Mr. McHenry on this legislation. It just goes to show that when the opposite side of the aisle is not focused on trying to destroy and undo Dodd-Frank, we can get to doing some credible legislation.
So I am very, very pleased about this legislation. It is another piece of legislation intended to help our Nation's startups and the venture capitalists who take a chance on them by providing a targeted exemption for certain venture capital funds.
It is also a piece of legislation that appropriately balances the ability of a startup to raise capital with the need to protect investors in the startup. When we fail to strike this balance, investors suffer, small businesses suffer; and when taken to the extreme, our entire economy can suffer.
During consideration of this bill in committee, Mr. McHenry and I offered an amendment to create a new exemption for qualifying venture capital funds that have no more than 250 investors and only $10 million in invested capital. These smaller funds will allow angel investor groups to better pool their resources among more accredited investors to make targeted, high-impact investments in the very companies they create the most jobs: startups.
This structure is used today by AngelList, a company that matches investors meeting certain income and asset thresholds to pool their money into a special purpose fund and invest together in startup companies.
Importantly, both the companies and the investors benefit from this structure, compared with making hundreds of smaller direct investments. A company, for example, only has a single point of contact, the angel fund advised by fiduciary, rather than hundreds of investors who all must individually approve corporate actions such as acquisitions and expanding ownership.
Investors also like this structure because they can delegate monitoring the startups they invest in to the investment adviser to fund. Such monitoring may be significant, considering that investors typically diversify among 30 to 80 companies.
H.R. 4854, as amended, is appropriately tailored to only certain venture capital funds, which must invest at least 80 percent of their committed capital in the equity of small companies. Under the bill, those funds must have no more than 250 investors and no more than $10 million in this invested capital, ensuring that they are small enough that investors are able to monitor and manage their investments with the funds.
This language ensures that we aren't creating a loophole for other investment companies, like mutual funds, to avoid regulation, nor are we providing relief to other private funds, like hedge funds or private equity funds, that have very little restrictions and investor protections.
Finally, I would like to express my appreciation of Mr. McHenry's efforts to make changes to this bill addressing some of the concerns of investor advocates, like the Consumer Federation of America and Americans for Financial Reform. His efforts have made this a good bill that deserves our support.
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Ms. MAXINE WATERS of California. Mr. Speaker and Members, again, I am very pleased to join with Mr. McHenry on this legislation. I really have no further requests for time, and I am going to yield back the balance of my time because I am so looking forward to getting back to the discussion that we are going to have later on this evening on guns and gun violence.
I want my constituents to know I have not abandoned that issue. Others have not abandoned that issue. We look forward to really debating whether or not we are going to make sure that people who are on the no-fly list certainly can't buy guns, and we want universal background checks. I know this has nothing to do with this bill, but I will just take this opportunity to say that.
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