Congress, listen up: It ain't broke, so don't fix it. Sen. Christopher Dodd Getty Images file Let's say you're a doctor, making $260,000 a year, with a nest egg of a half million bucks, safely invested, and a beautiful home worth $600,000, and no mortgage! You know an entrepreneur who's invented a great new medical device — one you know is useful — and you want to invest $50,000 in her new company. You think you'll make money, the entrepreneur gets help starting a company, jobs are created, lives may be saved. It's good for America. Everybody wins, right? Well, evidently Congress doesn't think so. Buried deep inside the gargantuan financial reform legislation now before Congress are some little-noticed provisions that are going to make it impossible for that doctor to invest, make it harder and more expensive for that inventor to start a company, and much, much harder for people like you and me to start a business. So listen up — and then write your Congressperson. That hypothetical doctor is a member of one of the most important groups in helping America create jobs and be competitive —angel investors. Angels are private individuals who invest in new companies, providing critical start-up and early-stage expansion funding. They're the ones who provide the $25,000 or $250,000 that enable an entrepreneur to turn an idea into a job-creating reality. Now, bear with me, because some of this is going to seem minor and technical, but let me explain how provisions in the Financial Reform bill can keep you from getting your next great business idea off the ground. Here's what Congress is currently proposed regarding angel investors and start-up funding in the legislation: • "Accredited investors" — Require investors to have a minimum net worth of $2.3 million or annual income of $450,000 — up from $1 million or $250,000. • SEC registration — Require start-ups to register with the Securities and Exchange Commission and be reviewed for 120 days before raising any money. • State control — Eliminate the federal waiver and allow states to regulate these private offerings. Now, these may not seem so bad, but here are the likely, real-world consequences for you and for me: 1. You'll have a MUCH harder time finding people to invest in your company. Changes in the accredited investor rules will prohibit a huge percent of people from investing in start-ups or business expansion. The Kauffman Foundation said it may eliminate 77% of all angel investors. Since the legislation was introduced, I've talked to two people who now actively invest in start-ups — one a member of a well-known and highly respected angel investment group — who will not be eligible to invest in new companies if these provisions go through. They are business and investment savvy, and they prefer putting their money in start-ups rather than the stock market. Why should the federal government keep them from doing so? Since the legislation was introduced, its primary sponsor, Sen. Chris Dodd, D-Conn., said he'd be willing to amend this provision to bring the net worth provision back up to $1 million, but that would have to exclude the value of the investors' home. While that seems reasonable enough, it would eliminate a huge percent of current angel investors (and both my friends). Hey, Senator Dodd, why can't someone invest in a start-up even if most of their net worth is tied up in their home rather than in mutual funds? 2. The registration process would kill a lot of potentially great new companies. Small, new companies have to respond fast to changing market conditions. In the world of technology, four months can be an eternity. Not only would the registration process take valuable time, it would eat up a lot of a start-up's limited, valuable finances. Instead of hiring engineers or marketers, entrepreneurs would have to spend more money on expensive securities attorneys. 3. A state-by-state free-for-all will make it cumbersome and costly for entrepreneurs to raise funds. They'll have to make their way through varying state processes and, if raising money in different states deal with potentially confusing and conflicting regulations. NONE of this is necessary. We've had an explosion of entrepreneurial growth in this country over the last 20 years, financed in large part by angel investors and few problems. Congress, listen up: It ain't broke, so don't fix it. Leave the angels and entrepreneurs alone. Rhonda Abrams is president of The Planning Shop, publisher of books for entrepreneurs. Her newest book is Hire Your First Employee: the entrepreneur's guide to finding, choosing, and leading great people. Register for Rhonda's free business tips at www.PlanningShop.com. For an index of her columns, click here. Twitter: twitter.com/RhondaAbrams. Copyright Rhonda Abrams 2010. Guidelines: You share in the USA TODAY community, so please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Use the "Report Abuse" button to make a difference. You share in the USA TODAY community, so please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Use the "Report Abuse" button to make a difference. Read more