Will Dodd finance reform kill Silicon Valley?

In its present version, Chris Dodd's financial reform bill deals a harsh and inexplicable blow to entrepreneurship in America by increasing restrictions on private entities, also known as "angel investors," that are allowed to invest in them.  From VentureBeat:

Angel investors don’t usually stay up at night worrying about Capitol Hill. But a financial reform bill proposed by Chris Dodd, the Democrat chairing the Senate Banking Committee, includes new restrictions on startups and angels.

Not surprisingly, investors aren’t happy about it, saying it’s “insane,” “frankly ridiculous,” and aims to “destroy Silicon Valley.”

There are three changes that should have a particular effect on angel investors, a catch-all category which includes everyone from friends and family members who invest in a startup, to unaffiliated wealthy individuals, to side investments made by venture capitalists acting on their own.

First, Dodd’s bill would require startups raising funding to register with the Securities and Exchange Commission, and then wait 120 days for the SEC to review their filing. A second provision raises the wealth requirements for an “accredited investor” who can invest in startups — if the bill passes, investors would need assets of more than $2.3 million (up from $1 million) or income of more than $450,000 (up from $250,000). The third restriction removes the federal pre-emption allowing angel and venture financing in the United States to follow federal regulations, rather than face different rules between states.

This overreaching legislation may be too much even for the left:

Chris Sacca, an angel investor and former Googler who campaigned for Obama, also tweeted that people who “care about startups and making sure they have access to capital” need to sign a petition against the investing regulations.

I asked Sacca for more details about his opposition. In a voicemail, he said:

Obviously, I’m deeply concerned about Senator Dodd’s proposal to place these restrictions on angel investing. I think angel investing is undeniably one of the largest engines for job creation as well as innovation and competitiveness on the global scale for the United States. There’s no doubt about it that the restrictions that he’s proposing would absolutely chill investing.

Specifically, one of the things we need to take into account is while 10 years ago it may have taken years to build a company, companies are now built in a matter of weeks. So this 120-day waiting period is frankly ridiculous. I have companies with tens of thousands and hundreds of thousands of users that are built in a matter of weeks. They’re generating actual dollars of revenue, creating jobs, investing in real estate office space, capital equipment, etc. If they had to wait 120 days to actually apply for the ability to obtain financing it would absolutely just crush that market.

I think this is a very short-sighted proposal. It seems far afield from the problems that the banking committee is actually trying to address.

In "Cutting Angels' Wings", Kejda Gjermani at Commentary Magazine expresses the view that the proposed restrictions on startup funding will be debilitating to startups and a windfall for "Big Business:"

All the prerogatives over private businesses; all the power over health care, now near absolute; all the dabbling in the inner workings of financial institutions; in short, all the regulation in the world, couldn’t satisfy this government. Are the Democrat legislators ever going to have enough? Or is their regulatory fetish feverishly looking for new, exotic objects?

While Obama sheds crocodile tears over how hard startups have it, his henchman is working night and day to ensure that they never receive seed funding. Whichever way this bill is looked at, not a single rationalization for saddling angels with such burdens can be found. Unless, of course, Democratic legislators so believe in their own rhetoric of strife against them big, eeeevil corporations that they want to kill them in their womb or prevent them form ever being born, let along growing big. And if such is the motive, conscious or unconscious, no measures could backfire more sorely than the ones being dealt out. For any regulation that raises new barriers to entry eventually hinders competition, confers undue advantages to incumbents, and fosters just the kind of environment where oligopolies can flourish. If there ever were such a sinister monolithic entity as “Big Business,” it could not be more satisfied with this bill. But it is surely an occasion for entrepreneurs to weep, as I can attest from being married to one, all of whose startups owe their inception to angel investment and might have never come into existence under such debilitating regulation. Economic recovery in America is being dealt a crippling blow.