Late last week I was in DC for the National Venture Capital Association board meeting. We reviewed a number of very important industry issues (possible regulation, policy initiatives around innovation, tax issues) – it was a very productive session. Later in the day a few of us from the NVCA board met with a number of Congressmen on Capitol Hill.
The initial meeting was with members of the “New Dems” coalition which is group of nearly 70 Congressmen who have come together to drive a moderate pro-growth agenda to strengthen the innovation economy. This was a highly engaged, well-informed group of legislators who are clearly focused on very important initiatives which will address many structural issues standing in the way of growth. It was music to my ears.
As just an ordinary citizen I often find the notion of productive government oxymoronic, and frankly, at times, laughable. But this meeting very much opened my eyes – that there is such a large block of legislators all pulling in the same direction to drive a number of initiatives to help small businesses was very gratifying. In fact a few of the key players in this group, particularly Rep. Scott Murphy, are either former successful business executives or VC’s who clearly understand the issues confronting small businesses.
We discussed at some length the specter of VC industry regulation which is contemplated in the financial services overhaul regulatory proposals now being debated in DC. Don’t get me started – the notion that somehow the VC industry creates “systemic risk” is laughable. Let me count the ways:
• Our investors (LP’s) are committed to our funds for 10+ years – that is they are locked up
• We invest in private stock, often creating new companies (FYI – I would guess that 75% of our investment dollars go to salaries)
• We do not use leverage
• We do not use derivatives
VC’s are not hedge fund managers. I worry that regulating the VC industry as if we were hedge funds or large investment firms will meaningfully impair a source of capital which is uniquely positioned to fund early stage companies – and that will be bad for all of us.