HALOS Act Could Help Create Startup Jobs

June 23, 2014 
By Scott Whipple

U.S. Sen. Chris Murphy has been visiting towns and cities in Connecticut, hosting roundtable discussions with entrepreneurs and “angel investors.” He’s been looking for feedback on support they needed from the government to help create startup jobs. Recently, the senator met with entrepreneurs at Stamford Innovations and The Grove in New Haven. Based on the information from these discussions, he and fellow legislators are introducing legislation that would remove burdensome restrictions on individuals who want to invest in startups.

For a startup to secure capital to grow a business, entrepreneurs commonly attend “demo days.” These are conferences that allow startups to showcase their business models to valuable startup investors, such as the aforementioned angel investors, who put money into startup companies and venture capitalists.

However, new Securities and Exchange Commission regulations, initiated by the JOBS Act, have put angel investors participating in demo days at risk of being forced to reveal extensive personal financial details through a new third-party vetting process. This new perceived invasion of privacy deters many investors from backing startups who need support to grow their businesses.

Startups are critical to the future of America’s economy. In 2010, companies in their first year created an average of three million jobs. Angel investors provide an estimated 90 percent of outside equity to help grow these young businesses. The Helping Angels Lead Our Startups Act would help angel investors support these companies and create jobs in thousands of new startups.
Murphy points out that the HALOS Act would lift burdensome restrictions, preserving the same investor vetting process angel investors have been using for years at demo days. By removing restrictions, HALOS would allow startups to get the investments they need to grow their business and create jobs.

“We should be doing everything we can to support small businesses in this country, especially those with high-growth potential,” the senator said. “I’ve travelled around Connecticut and heard from investors and entrepreneurs alike that the most important thing we can do to create new startup jobs is to make it easier for angel investors to put capital behind these nascent companies.”

Murphy said the bipartisan HALOS Act will allow angels to more easily invest in startups at demo days, an ideal opportunity startups have to showcase their business.

U.S. Sen. Pat Toomey, Republican from Pennsylvania, has signed onto the bill with Murphy and four other legislators. Toomey started a chain of restaurants in 1990 in Allentown with two of his brothers.

“We used our own savings to fund the start-up costs and worked day and night and eventually created hundreds of jobs in the Allentown and Lancaster region,” he said in a written release. “So, I understand the unique struggles, uncertainties, and risks involved in starting one’s own business. We can make it easier to be innovative [with] a bill that will make it easier for startups and angel investors to connect and work together to grow businesses and hire more workers.”

Murphy is joined in the bill by Toomey, U.S. Senators John Thune (R-S.D) and Brian Schatz (D-Hawaii), as well as U.S. Reps. Brad Schneider (D-Ill.) and Steve Chabot (R-Ohio).