Support for angel investing, a clean energy bill, and the CDFI Fund – SJF letter to Congress

April 14, 2010
Senator Kay Hagan
521 Dirksen Senate Office Building
Washington, DC 20510

Dear Senator Hagan,
I am writing to share SJF Ventures perspective on 1) Risks to angel investing and entrepreneurship from provisions in Senator Dodd’s Financial Reform Bill; 2) The need for a strong energy and climate bill and 3) support for an increased appropriation for the CDFI Fund. SJF Ventures is a ten year old venture capital fund with offices in Durham, NC, New York City and San Francisco. We invest nationwide in cleantech, clean energy and positive impact ventures that are growing rapidly. SJF manages two funds, which are certified CDFIs, have invested in 30 companies that now have aggregate revenues over $500 million, 128 facilities, and more than 5,000 employees; see www.sjfventures.com. Our allied nonprofit, SJF Advisory Services, provides assistance to and increases access to capital for high growth, positive impact entrepreneurial businesses and nurtures and strengthens the fields that enable these efforts to flourish.

Delete Sections 412, 413, and 928 from the ‘Restoring American Financial Stability Act of 2009.’
We support the overall reform of the financial system being pursued in the Act. However, sections 412, 413 and 928 greatly restrict the number of individual investors that can finance early stage companies and increase the delays, costs, and paperwork by opening up small equity financing to state regulation. The current system of federal regulation of early stage financing under ‘Regulation D Offerings’ works well and has helped nurture America’s vibrant entrepreneurship economy which is critical to our economic recovery. These sections threaten to stifle that innovation. Small entrepreneurial companies and their investors, unlike large financial institutions, were not responsible for the financial market meltdown and indeed, they have been critical in helping our communities begin the recovery. The Census Bureau and Kauffman Foundation have released studies that show that start-ups and firms less than five years old generated ALL of the net new jobs over a 25 year period. Multiple trade associations including the National Venture Capital Association, the Angel Capital Association, and the Community Development Venture Capital Alliance have opposed these changes and I have yet to see any advocacy or logic for these sections of the Act. If anything, we should be looking at strategies for increased angel investment and entrepreneurship, such as minimizing restrictions on small investments of less than $25,000 in start-ups. For more information, see the helpful documents on the Angel Capital Association website:

http://www.angelcapitalassociation.org/resources/public-policy/federal-policy-issues/highlights/

Pass Comprehensive Energy and Climate Legislation.
Countries around the world, particularly Germany, China, and South Korea, have recognized the opportunity of becoming world leaders in clean energy and low carbon technologies. Many technologies invented in the U.S. are being more rapidly commercialized overseas due to those country’s clean energy incentives and carbon reduction plans. Our country is overdue in creating a framework for reducing the emissions of carbon pollution and rapidly scaling the implementation of energy efficiency and renewables. SJF Ventures has invested in early entrepreneurial leaders such as groSolar and RealWinWin, and many more firms are working to compete with the incumbent fossil fuel industry.

The United States has a tremendous opportunity to help build the industries of the future – in smart grid, efficient lighting, green building, electric vehicles, insulation, industrial efficiency, biofuels, sustainable agriculture as well as solar, wind, biomass, current, wave, and hydro renewable energy. Passing strong climate protection legislation is the right thing to do for our economy, industry, citizens and environment. It is also a moral imperative. The world we bequeath to our children and grandchildren will be very different depending on what we do this decade. If the U.S. passes strong climate legislation, we will be able to challenge the rest of the world to match our commitment and build a world with sustainable energy and employment for all. We will also assure that US companies will win their global market share of the new markets for energy and efficiency technologies, products and services. Without US leadership on energy and climate, we risk a spiral of hyper development in China and the developing world accelerating emissions, destructive climate change and continued security risks due to global reliance on oil from countries with dangerous regimes.

Support for the CDFI Fund of the U.S. Treasury Department in FY2011 Budget
The CDFI (‘community development financial institutions) Fund has been an important partner in the formation and growth of SJF Ventures. CDFI Awards totaling $2.5MM have helped SJF leverage $42 million in private capital in two venture funds and invest in 30 companies that have created thousands of high-quality jobs for minority and low wealth families. Our second fund, SJF Ventures II, LP, has a pending application with the CDFI Fund to help extend our financing to more growth business from 2010 to 2013. Small businesses, particularly in underserved markets, are having a very difficult time accessing credit and equity given the financial market problems, and CDFIs serve a critical role in leveraging mostly private capital to support these companies’ growth and their revitalization of local communities.

Thank you for your consideration of these three matters and feel free to consult SJF Ventures regarding any pending legislation regarding venture capital, entrepreneurship, community development, or clean energy. We appreciate your good work.

Sincerely,

David Kirkpatrick
Managing Director, SJF Ventures

Tags: angel investing, cdfi fund, cleantech, climate, energy, federal