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February 01, 2012 at 07:00 PM
Private investment in private enterprise continues to be the primary creator of wealth in this country. HNW investors know this all too well. It is estimated that so-called angel investors led the funding of more than 60,000 new private ventures in 2011. In January, the Institute for Private Investors, a private consortium of 1,100 ultra-HNW investors with minimum investable assets in excess of $30 million, noted in its annual Family Performance Tracking Survey that 55% of their members plan to increase their direct investments in private companies in 2012.
From the outset, the purpose of this column has been to encourage investment advisors to draw upon the wisdom of their HNW and ultra-HNW clients in recognizing that prudent investment in private ventures is an essential allocation component of any portfolio seeking to create wealth.
Seventy-year-old securities laws have restricted access to private venture investing to privileged, wealthy investors on the spurious premise that they are more “sophisticated.” As we have argued in the past, that is simply undemocratic and unfair. Venture Populist seeks to emulate the well-documented emerging fervor of angel investors and enable access to private venture investing to a broader investor demographic. Such that the vast majority of our nation’s private wealth has its roots in private venture investing and entrepreneurial activity, we maintain that the experience of private venture investing is a right of every investor, rather than a privilege that is to be bestowed upon an individual by an overly paternal government or regulatory regime based on arbitrary and bigoted notions of an investor’s “class” and relative wisdom.
It appears as though the spirit of venture populism is gaining momentum among progressive lawmakers. On Nov. 3, the U.S. House of Representatives passed H.R. 2930, the Entrepreneur Access to Capital Act, a “crowdfunding” bill that will allow startups to offer and sell their securities via crowdfunding and social networking sites. The bill, which passed the House with strong bipartisan support by a 407 to 17 vote, will allow stock offerings up to $1 million to take place on the Internet across state lines without the costly startup, legal, filing, accounting and auditing fees often associated with such offerings. H.R. 2930 would limit an individual’s investment via such a platform to $10,000, or 10% of the investor’s annual income, whichever is lower. The House bill also preempts state securities laws, thereby mitigating the time, energy and costs associated with state blue sky filings.
