Angel investors are one of the keys to job growth

With our economy continuing to lag in the most important area -- jobs -- elected officials should look at every action they take through the prism of job creation. Unfortunately, in both St. Paul and Washington, the priorities of legislators are not always in line with the issues families talk about at their kitchen tables. Jobs and the economy have undoubtedly been the most important issues for Minnesota families in the past few years, yet the focus of government has too often been elsewhere.

However, the Minnesota Legislature and Gov. Tim Pawlenty took an important step forward with the passage of a new angel investor tax credit during this year's legislative session. This tax credit, which I strongly supported during my years in the Legislature, is a key tool to encouraging investment in new, small business start-ups.

Entrepreneurs face significant financial hurdles when attempting to start a new business and often lack the collateral to secure loans. Additionally, these new businesses are typically too small to secure funding from venture capitalists and other investors. Instead, new entrepreneurs often depend on "angel" investors, individuals who are accredited and willing to invest in higher-risk, early-stage businesses unable to secure funding from more traditional sources.

U.S. angel investors invested $19 billion in 2008, with nearly two-thirds going to small businesses. In fact, companies like Google and Costco benefitted from angel investors in the early stages of their business growth. It goes without saying these investments have paid off in huge dividends through the jobs, innovation and economic growth these companies have since contributed.

Minnesota, which for years lagged behind neighbors such as Wisconsin that already had an angel investor tax credit, now stands to benefit greatly. This is particularly important for key Minnesota industries like medical devices and bio-technology -- businesses that require significant investment on the front end, but create tens of thousands of well-paying jobs in our state.

Given that over two-thirds of all job growth in the United States comes from small business, it only makes sense to encourage investment in entrepreneurs and new business ventures -- especially during these difficult economic times.

Angel investors are willing to back new, higher-risk small businesses when others will not, and Congress should not be creating additional barriers inhibiting this much-needed growth in our economy. In fact, Congress should be doing the opposite: encouraging investment in start-ups and new businesses.

To that end, I was pleased to see the Senate take bipartisan action last week to help address some of these issues in the current draft of the regulatory reform bill. The initial bill contained some very troubling provisions that would have made it much more difficult for angel investments to occur. The amendment offered by Sens. Kit Bond, R-Mo., and Chris Dodd, D-Conn., modifies the bill to help continue angel-level investing. I applaud this effort.

Since taking office, I've pushed for a focus on our nation's true job creators, small business, in order to turn this economy around. If we are going to have a real economic recovery that creates jobs, small business will lead the way.

New entrepreneurs and their start-up businesses are a major component of that process. It is critical that Congress follow the lead of Minnesota, and seek ways to encourage -- not hinder -- angel investment in new businesses. By doing so, we can take a key step toward finally getting the economy moving again.

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Erik Paulsen, R- Minn., is a member of the U.S. House of Representatives.

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