Here are some relevant links about this across the web touching on the effects of the Bond/Dodd amendments:

http://www.angelcapitalassociation.org/resources/public-poli... (statement by Angel Capital Association with links to primary sources)

http://dodd.senate.gov/?q=node/5629 (statement from Senator Dodd's website)

http://www.reit.com/PolicyPolitics/FederalNonTaxLegislation/... (with links to primary sources)

http://www.thecorporatecounsel.net/Blog/2010/05/prohibited-u... (with discussion of certain remaining problems with the amendment language)

http://online.wsj.com/article/SB1000142405274870395790457525... (WSJ editorial entitled "Angels (Back) in America" - behind paywall)

http://martendale.com/government/article_Adams-Reese-LLP_101... (excellent technical discussion on where this stood a short while ago just as the amendments were being introduced)

http://www.pehub.com/71242/up-the-bracket-dodds-discriminato... (a strongly expressed negative view of the compromise, arguing that excluding value of principal residence is harmful and emphasizing that the accredited investor rules should be liberalized so that more and more people can invest - strongest point: the same people who block small investors from investing in startups also strongly push state lottery systems that do far more harm to small "investors" than startup investing would ever do)

I find the comparison of a state lottery, which is something completely not personally sold, to investment in a business, pressured by friends, family, or by random salespeople, to be in such different categories, the comparison is disingenuous.

Additionally, the lotteries require an infinitesimal expenditure compared to startup funding.

While I agree with the pehub poster that the portion about housing and mortgages is off, I would suggest that liquid assets - all liabilities be used as a gauge of net worth, then lower the floor to something more like 700k.

Clearly you've never lived in a major city or around poorer people. I've seen people drop the kind of money that would make me cringe to spend on lottery tickets every week for the last 10 years that I've lived in Boston.

It's a joke to suggest that people are pressuring family to invest in their companies in the same way that the lottery pushes itself on those least able to afford it. The lottery is a lot more effective at preying on its victims than any salesmen that I've ever met. The lottery is a tax on the poor dressed up to look good by politicians who seek to gain from it.

A single lottery ticket is nothing but the people I see never just buy one. They buy a lot of them.

It does happen. I've met more than one family where an elderly mother and/or father where forced back into working because they invested in their entire life-savings into their child's (or nephew's, niece's, etc...) hair-brained get-rich-quick scheme.

That said, I don't see how it's governments role to make sure people don't screw themselves over. Bring on casinos, lotteries, and open investement as far as I'm concerned.

I agree with the exception of the lottery. I'd rather not have the state involved in this. I just don't like my tax money funding (even if the lottery more than pays for itself) something I consider immoral.

How is your tax money funding the lottery when you admit that it more than pays for itself?

In fact, the lottery where I live pays hundreds of millions of dollars into a school fund every year; money that your tax dollars otherwise would have to pay for.

I suppose I have to support some of the infrastructure it uses before it becomes profitable. I just don't want the state involved in that sort of activity. It's the same reason I wouldn't like war even if we paid for it with the spoils.

>Clearly you've never lived in a major city or around poorer people

I live in one of the very odd Atlanta zip codes that abuts a very poor zip and very wealthy zip (byproduct of segregation in the past). BMW's and Lotuses drive through the Taco Bell which is across from Section 8 Housing. (Here is the taco bell if you want to see, no Beamers in the drive thru at the time of photographing): http://bit.ly/a1RHMe

Of COURSE there are compulsive gamblers: They exist in every population.

I actually DO see people play the lottery all the time (and when it's over 100 million, I sometimes purchase a ticket or two). And I'll say, people of all stripes buy lottery tickets.

But again, I show you the size of commitment between business investment and lotteries. While in aggregate, people may spend lots on lotteries, at any one time, they are not forced to spend 1-50k dollars to do so. However with business investment, they spend those much larger amounts, and MUST spend those larger amounts to "play the game" so to speak. While some crazy people may spend hundreds per week on the lottery, exceedingly few spend thousands. Exceedingly few spend their savings.

However with BUSINESSES, people think "Oh, this is a SAFE investment" and they DO spend money they shouldn't spend and instead should be saving. (And yes, the compulsive gamblers have no savings, we know that, and they're not going to have any savings if you let them invest in websites either).

If you look at the data contined in: http://faculty.chicagobooth.edu/emily.oster/papers/powerball...

You'll see, lottery funding comes across from ALL income groups, and the vast majority of lottery sales come from the middle 60% at all times. (Fig 1 on page 15)

I've never really understood the reasons for limiting investors in companies to those who are already rich. The current crisis was in no way caused by anyone investing in startups or small businesses. The crisis was caused by too much credit flowing into all the wrong hands due to the incentives that existed for that to happen. The crisis of 1929 had the same cause. The problem is inflation plain and simple. The animal spirits that Keynesians are invoking now were not the cause of the housing bust-the fundamentals just were not there. They weren't ever there. Inflation hid that fact for years from many people.

These sort of regulations seem to have the effect of keeping more people in the middle class. I don't like raising the limit or messing with what exists now partially because what's there is absurd. The government wants to blame the market for its own failures and bad actions but it's not true. Even Bernie Madoff is a direct result of the Fed killing yield causing investors to seek returns wherever they could find them.

Dodd is in the pocket of the bankers and always has been. This last reform bill is a final gift to the elites on his way out the door. These sort of rules only strengthen the Fed and its control over the banking system. Not sure why anyone would be listening to Dodd and hoping he would do some good in the world.

"Even Bernie Madoff is a direct result of the Fed killing yield causing investors to seek returns wherever they could find them."

You make the right point about the fundamentals not being there for the housing bust. However it is hard for me to take you seriously when you say things like the above. Investors are always seeking heavy returns -- and Madoff didn't start a Ponzi scheme because of the Fed he did it because he is greedy.

When banks are offering 1% on deposits you are going to have weird situations arise where actors in the market are seeking yield on their money. Even Geithner acknowledged that.

because not everyone invests in Google...for every Google there are thousands of companies that crash and burn. Just look at YC, a savvy investor by any metric, with hundreds of startups under their belt...and they had what 20 exits?

It's easy to sell a startup investment to non-savvy investors..."invest X into our company and 5 years from now you'll be a millionaire!"

A millionaire can afford to lose 50-100K on a bad investment, someone making $40-50K a year cannot afford to lose even 15K.

Can't they decide that? Wouldn't they be in the best position to know that first hand? Why do you think you know better? How could you possibly know better?

The same argument exists for why Social Security is a good idea. Right now the government takes 15% of my income while saying they know how to spend it better than I do. They've started wars, bailed out G.M., the banks, and whoever else has paid them off. It seems like they're not to be trusted with much of anything that matters.

The same argument exists for just about every fiscal requirement the government imposes on us, that doesn't mean it's not necessary.

People on HN are not normals. If the USA was filled with nothing but hackers, we probably would do just fine with a more libertarian set of policies. Unfortunately, we're the fringe, and we have to pay for the masses' mistakes.

Many normals would gamble away their wealth. Without social security, many people would be ruined and too old to sustain themselves.

no they can't.

unlike real gambling where there are real odds of success, startups are a crap shoot each and every time. There is no science, no formula for success. Even the best investors, the ones who get the BEST deals like Ron Conway, don't have a perfect track record.

And unlike big time investors like YC/RC, these are the people who'll be investing into 1-2 companies max(no diversification), who won't know what they are doing. Who'll be gambling with money they can't afford to lose.

The networth requirement isn't there to stop investment, it's to stop investment from gullible investors who'd likely be defrauded by snake oil salesmen pitching their startups.

OF COURSE the site will make $5 million in 3 years. OF COURSE you should invest in us. YOU CAN'T lose. Hockey stick, hockey stick, hockey stick.

Real odds of success? In gambling, for the house (or state lottery) to make money, the expected value of your bet has to be negative. This is not the case with investments in start-ups.

Are you sure?

90% of VC backed startups fail. What do you think that number is for angel backed startups?

I'd love to see the cap changed to allow smaller investments by currently non-accredited investment. If we replaced the hard asset/income cut-off with an amount indexed by either income or assets, it would make crowdfunding of small businesses a viable option.

Since regulators don't want to see "Middle class family's life savings wiped out in investment fraud," allowing people to invest up to 3-5% of annual income or 2% of total assets in a given business would create additional sources of funding, prevent any one startup failure from being personally damaging, and give individuals the chance to invest locally in growing businesses.

This wouldn't have made sense twenty years ago, but the administrative requirements can be a lot more easily amortized by a central crowdfunding platform these days.

You raise a good point, although there might be some difficulty with legislation requiring people to declare their income to investment vehicles.

The basic problem is that while something like Diaspora can attract goodwill funding by being in the right place at the right time - I kicked them $25 in exchange for a t-shirt and the vague hope that they can advance the state of distributed network services. But most people who want to invest in something are looking for an ownership stake, and as soon as you offer them that you've initiated a much more complex contractual relationship and are subject to a very different legal regime.

Rather than an income percentage cap, there might be some mileage in a small monetary amount. For example, commercial transactions of goods above and below $500 are treated differently. There are already provisions in Regulation D for companies that don't need to raise more than $1m or $5m in a single year, which might be great for startups, but those companies appear to have less of a legal 'safe harbor' than those which can raise an unlimited amount.

The 'safe harbor' provision is in SEC regulation D, rule 506: http://www.law.uc.edu/CCL/33ActRls/rule506.html in subclause (a), it's the exemption from rule 4(2) of the Securities Act of 1933 which gives firms the legal security blanket. Although rules 504 and 505 limit issuers to smaller amounts (but still quite sufficient for many new businesses), they don't have that specific exemption, and so the founders are implicitly subject to the prohibitions on selling or offering shares across state lines.

On the last point, some regions have "coordinated review" setups where you can simultaneously offer a <$1m, rule-504 security across some state lines, within the region (you can also submit simultaneously to multiple regions): http://www.coordinatedreview.org/crscor.html

37 of the 50 states participate in one of the five regions, but California and New York are two glaring omissions.