Chris Hanks with the Small Business Development and Job Creation Special Committee

Chris Hanks, a member of The Entrepreneur School’s faculty, testified Tuesday March 16th, 2010 in front of the Georgia House Committee on Small Business Development and Job Creation.  Chris talked specifically on the programs and activities that assist aspiring and existing entrepreneurs throughout the state.  He was also there in support of House Bill 1001, which is The Angel Investor Tax Credit Bill.  As follows is an interview I did with Christ about the Angel Tax Credit and his time with the Special Committee on Small Business Development and Job Creation.

Interview with Chris:

Jacob:  What is a brief description of the Angel Tax Credit.
Chris:   There is a much longer story to this but basically the Angel Tax Credit is a part of a larger package called the Jobs Act of 2010 that focuses on providing a tax incentive to angel investor to invest in young start-up businesses.   [Here's a link to the bill:  Official site for HB 1023 - Jobs, Opportunity, and Business Success Act of 2010 -  See section 9 for the Angel Tax Credit].  [Here's a link to the Angel Tax Credit Bill]

Jacob: For those who may not know what an Angel is, will you elaborate on the term?
Chris: A company is started with an idea, customers to which to market, and execution. Money is needed to fund each of these steps. Initially, that money comes from bootstrapping, the founder, friends and family, credit cards, etc… As the company grows, further rounds of funding are often needed. Angels are the next step. They are typically high net-worth individuals who invest in early stage companies with their personal capital.

Jacob:  What exactly does the Angel Tax Credit provide and why is it in a jobs ‘creation’ bill?
Chris:  Basically it provides a tax credit of half of the total investment, up to $50,000 to an angel investor who invests his/her capital in a young startup.  There are then stipulations for the tax credit on the investment that keep the new company in the state of Georgia.  The idea then is to fund young companies in Georgia and incentivize those who have money to invest in them. Then the companies grow and create jobs for the state.

Forty percent of Atlanta’s high-tech start-up companies leave the state within three years, according to a recent Georgia Tech study.  “Instead of building great high-tech companies, Atlanta has become a feeder system for great high-tech companies in other states,” says study co-author Dan Breznitz.

Jacob:  What are your thoughts as an entrepreneur and professor regarding the bill?
Chris:    Currently, there are 22 other states that have similar incentives, and those states have benefitted from new business creation, and new jobs and new revenue. Competing states also benefit from Georgia innovation as we’ve seen entrepreneur-graduates of our schools leave our state in pursuit of capital in other states. HB 1001 will help to address this.

This bill provides an incentive for active angel investors to become more active and for those angel investors who are the sidelines to get back into game, while keeping businesses in Georgia.

Jacob:  Every piece of legislation has people, champions, who are often responsible for the creation of and implementation of the bill.  Who are they for the Angel Tax Credit?
Chris:  This bill was introduced by TAG (Technology Association of Georgia) and has the support of the Georgia Chamber of Commerce, The National Federation of Independent Business and The Georgia Public Policy Foundation.  A group was also formed to fund the lobbying efforts associated with this bill. This group is the GAIC (Georgia Angel Investors Coalition).

Jacob:  What is the current status?
Chris:  This bill has been successfully progressing through various committees of the House of Representatives (the House originally deals with bills related to taxes) following which the bill will go to the Senate. This coming week is a very important week for the bill as two very important committees which will review the bill and then the bill will go to the floor of the House for a full vote.  Gaining support of the leadership of the House will go a long way in helping the bill successfully emerge this process in a timely fashion.

Links, Quotes, Facts:

Links:

• How Georgia can fuel job creation with early-stage capital – Mike Eckert: A venture fellow with Georgia Tech’s VentureLab and serves as an entrepreneur in residence with the Advanced Technology Development Center (ATDC).
• Lt. Governor discusses Georgia employment and Angel Tax Credit legislation – Casey Cagle:  Georgia’s Lieutenant  Governor
• Job Creation Committee Passes  - JOBS Act of 2010 –  Press Release
• Angel Investor Op-ed – Casey Cagle:   Georgia’s Lieutenant  Governor
• State of the Angel Investing Market, Circa October, 2009 –  Knox Massey:  An Atlanta Angel Investor
• Official site for HB 1023 – Jobs, Opportunity, and Business Success Act of 2010 –  See section 9 for the Angel Tax Credit

Facts:

• North Carolina’s angel investor tax credit program resulted in approximately 660 new jobs per year in high-growth companies providing average wages of $58,792. The success and accolades of the program have opened the door to increasing the tax credit cap amount to $7.5 million annually.

The reason North Carolina/RTP is cleaning our clock in funding young tech companies? Tax Credits. North Carolina has had tax credits since 1996 and now has two NEW angel funds of $5M each–all due to tax credits.

• Georgia’s unemployment rate has climbed from 4.3 percent in January of ’07 to 10.3 percent today, tying the record high for Georgia and exceeding the national unemployment rate of 10 percent.
• There are more than a half-million Georgians are out of work.