An SEC rule change in 2011 intended to protect angel investors has instead severely reduced startup funding for new businesses, according to a new study from the The University of Iowa Tippie College of Business. Jiaejie Xu, assistant professor of finance, says the rule change meant that SEC-accredited investors could no longer count the value of their house as an asset. As a result…

• The number of potential angel investors dropped by 20 percent
• Angel investments dropped by 11% in the most affected cities
• The rule change had its greatest effect in smaller cities away from the coasts, places that most need angel investors because they’re generally ignored by VCs and investment funds

As a result, the study finds entrepreneurs have been forced to rely more on SBA loans and second mortgages to finance their start-ups.