Seeking Economic Recovery, South Carolina Looks for Angels
Columbia, SC - South Carolina’s two angel investor networks—Upstate Carolina Angel Network (UCAN) and Charleston Angel Partners (CHAP)—are joining forces with state legislators to help revive the state’s struggling economy.
“Angel investors” are high net worth individuals who meet the accreditation standards set by the U.S. Securities and Exchange Commission. These angels invest their own private capital in early stage companies that present high risks and potentially high rewards. However, according to a recent study by the Kauffman Foundation based on US Government data, it is start-up companies that have created all net new jobs in the United States since 1980 and are crucial to the economic recovery process. As such, many states have enacted legislation to create “angel credits,” which help promote much-needed investment in start-up companies located within their borders.
Rep. Dwight Loftis (R-SC 19th District) and the late Bill Wylie have worked with UCAN and CHAP to create the “SC Angel Investment Act of 2011,” which was revealed today as part of the House Republican Caucus legislative agenda.
The bill has been co-sponsored by Rep. Dan Hamilton, Rep. Tommy Stringer, and Rep. G. R. Smith, and is modeled after legislation that has already been implemented with great success in more than 25 states, including Georgia and North Carolina. Implementing an angel credit system would help put young, high-growth companies located in South Carolina on a more level playing field with those seeking capital in neighboring states.
“This relatively small incentive would bring us in line with other states, where similar incentives have produced investments of 300 to 400% in private dollars,” says CHAP’s Executive Director, Andrea Marshall. “This incentive would fuel entrepreneurial activity in South Carolina, which will grow our tax base over time.”
The angel credits proposed in the SC Angel Investment Act would help increase angel investing activity in qualified, high-growth start-up companies in South Carolina by offering a 35% tax credit to investors, taken over two years. A proposed annual limit of $100,000 per investor and $6 million in aggregate would apply.
Rep. Loftis say the exact figures of the credit may change as the bill makes its way through the
UCAN’s Managing Director, Matt Dunbar, acknowledges that it may seem counterintuitive to pursue this legislation right now given the state’s current budget woes and upcoming plans for comprehensive tax reform. However, being on the front lines each day with entrepreneurs around the state who are trying to locate the capital they need to grow their businesses and create new jobs, he says he has gained a full appreciation of the urgency of the situation.
“We know that startups create jobs, and we know that access to capital is the key limiting factor for most startups in this economy, so using an angel incentive to bring more private investors into the marketplace should be very beneficial for both the near and long-term health of South Carolina’s economy.”
“The more startups we can fund through the ‘valley of death’ to successful growth, the more jobs we can create, the more venture capital we can attract, and ultimately, the more revenue we can generate for the state.”
Currently, less than 1% of qualified accredited investors in South Carolina invest with the state’s two angel groups, and the state ranked 39th for venture capital investments over the last year.
Dunbar and Marshall warn that South Carolina will fall even further behind other states in generating early stage capital for job-creating startups if angel investors find it more attractive to make their investments in neighboring states with angel credits. Georgia just passed a 35% angel credit in 2010.
Loftis agreed that “limited access to capital is one of the reasons South Carolina lags behind other states in entrepreneurship. We really need to focus on helping and growing small business to create jobs and improve the state’s economy.”
“Our state is telling entrepreneurs and their companies to move to Georgia or North Carolina and telling investors to follow them. We can’t afford to wait for a comprehensive reform bill to pass or wait for an economic recovery. We already know a simple, low-cost, high-return solution that is already working in states right next door to us. We need to act now.”
For additional information, please contact:
Upstate Carolina Angel Network