A House Committee will vote next week on legislation to offer tax credits to people who invest in startup companies. Some of these so-called “angel investors” have taken their message to that committee.
One of them, Jake Holloway, acknowledged that banks and venture capital firms won’t back the kinds of startups that angel investors will. He says that is because the risk is too high and the return takes too long.
“The best upside for a bank, if they lend to one of these companies is what, 5 percent interest? 8 percent interest? That’s the only upside for them. They’re not an equity stakeholder in it, and they’re risking a lot. They’re risking their depositors capital.”
Holloway describes angel investors as people who have a higher tolerance for risk and who typically invest within 100 miles of their homes.
An attorney who represents entrepreneurs, Kristin Kelley, says the states surrounding Missouri offer such incentives and that means Missouri is missing out. She says a recent example is with the company Square, that makes products to let people accept credit card payments on mobile devices.
“They started out in St. Louis. They couldn’t get investment. There wasn’t enough workers. They went out to (San Francisco) … they’re a multi-million dollar company … by providing a bill like this, by providing this kind of incentive you incentivize those companies to stay here.”
Kansas City Mayor Sly James says the credits would be good for his city.
“Why not create an environment where deep pockets who have money to invest are more willing to do so … when it comes to high-tech startups, Kansas City has created a unique environment that frankly other cities covet.”
No one testified against the legislation.