Testifying in Support of Angel Tax Credits

Jason Wiens, NEXT Missouri’s Coalition Director, testified in support of HB 235, the Missouri Angel Investment Incentive Act, on March 12.

Here’s Jason’s testimony as prepared for delivery before the House Higher Education and Workforce Development Committee

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Chairman Brown, Ranking Member Hein, and Members of the Committee:

My name is Jason Wiens and I’m testifying on behalf of NEXT Missouri—a statewide coalition seeking to grow Missouri’s economy by fostering entrepreneurship and innovation.

NEXT Missouri strongly supports HB 235, the Missouri Angel Investment Incentive Act.

New and young businesses are the primary source of new jobs in Missouri, with startups creating about 80% of all net new jobs in the state.

While all types of businesses are important to Missouri’s economy, a subset of businesses developing and commercializing innovative technologies, products, and services, can be especially powerful engines of economic growth.

These new businesses need capital to hire and expand.

Unfortunately, there’s a gap between the amount of capital available to Missouri startups and what these businesses need.

That’s where the Missouri Angel Investment Incentive Act comes in.

This legislation seeks to increase the amount of capital available to new and young innovative Missouri businesses by incentivizing private investors to enter the market and by helping existing investors invest more.

These early-stage private investors who take informed risks in exchange for an ownership stake in a business are known as “angel investors.” Many are former entrepreneurs or business leaders.

In addition to providing capital that fuels business growth, many angel investors also share industry knowledge and expertise with the businesses they invest in.

There are many smart and pioneering Missourians in all communities across the state who are developing new technologies and starting promising new businesses.

If we can make more capital available to them, we can help their new businesses put down roots, cementing their growth in Missouri, even as investor dollars from other states flow in in later years.

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Angel investor tax credits are part of many states’ economic development strategies, including five of the eight states that border Missouri.

Just like in Missouri, the financing needs of startups exceed the capital available to new businesses, and these states have put angel investor tax credits in place to close those gaps.

The Kansas angel investor tax credit, for example, has helped more than 500 Kansas businesses raise more than $589 million and create more than 2,300 new jobs (2005-2022). For every dollar of tax credits issued, businesses utilizing the credit raised more than $6.00 in capital.

Evidence also suggests the tax credits are effective at bringing capital off the sidelines.

61% of the angel investors who participated in Tennessee’s angel tax credit program were new investors (2017-2020).

The Missouri Angel Investment Incentive Act is structured like these successful programs, including by offering a more generous tax credit to investors who invest in rural-based businesses.

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In conclusion, this legislation is all about helping innovative Missouri-based companies access the capital they need to grow and create jobs in Missouri.

As these businesses grow, investors will receive a return on their investment, giving them additional dollars to invest in even more Missouri-based companies that will also grow and create jobs.

And the cycle will speed up and continue.

I encourage you to support this legislation and look forward to answering any questions you may have.