Obama and Startups

One reason (of many!) that I am supporting Obama is that his economic plan is fundamentally more sound, especially when it comes to early stage innovation.

Obama understands that to stimulate the economy, we need to get startups off the ground to sell new products/services and to create new jobs. In his Small Business Emergency Rescue Plan, Obama notes that "we need to encourage investment in small businesses to help create jobs and turn our economy around. That’s why Obama will eliminate all capital gains taxes on investments made in small and start-up businesses."

In a time when angel investors have lost fortunes in the public markets, they will need incentives to continue to take risks on new startup investments. I believe Obama's plan provides a sound incentive for angel's to stay in the game, vs. retreat to the sidelines. As more institutional VCs move away from seed/early stage financing towards later stage investments, there is a growing gap between company formation and a traditional Series A investment. This gap is filled by angel investors and if they move to the sidelines, we will see many new startups never make it to a Series A because of cash constraints. Thus, it is important to keep the angels in the game, and eliminating capital gains on their investments is one sound method. It will keep the innovation engine of the U.S. alive and humming.