Continued innovation calls for continued access to investment capital


In the spirit of patent reform, the need for job growth and fostering innovation, we look at Ken Jarboe’s summary of  Improving Access to Capital for High-Growth Companies, a recent report issued by the National Advisory Council on Innovation and Entrepreneurship (NACIE)

The report calls for a number of recommendations for Early-Stage Access to Capital:

1. Provide a 30% refundable tax credit on angel group investments of <$200,000 into small businesses; 2. Provide a 100% exclusion on capital gains tax to small business investments held for 5 years, with deferrals permitted for roll-over investments into other small business within 9-month periods; 3. Provide a 100% exclusion on corporate income tax for the first taxable year of profit, a 50% exclusion on following two years of profit, and tax deferral on exercise of nonqualified stock options in small businesses; 4. Reduce further the SBIR/STTR grant review process from the current 6-12 months to a 3-month timeframe; 5. Support the SBA's proposed Early Stage Innovation Fund and efforts to further reduce SBIC license processing times and interest rate burden. Recommend future SBIC eligibility consideration be given to emerging investment classes such as angel groups, micro-VCs, and VDOs (venture development organizations).

The report also recommends steps for Later-Stage Access to Capital:

6. Maintain the capital gains tax rate at 15%; 7. Amend the Spitzer Decree to permit payment for analyst coverage through banking revenue, and mandate analyst coverage of IPO issuers for at least five years; 8. Amend Sarbanes-Oxley Act Section 404 to reduce compliance controls and external-audit frequency on smaller public companies.

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