Yesterday, with the encouragement from our chairman Paul Maeder, the NVCA joined the national website blackout in opposition to the Stop On-line Piracy Act (SOPA) and Protect IP Act (PIPA) now being considered in the U.S. House of Representatives and Senate respectively. As many know, the legislation aims to combat online piracy but, as currently written, will have severe consequences for the Internet and innovation. 

As Paul has expressed, "Protecting copyrighted material is a worthy and important goal.  In my opinion, SOPA and PIPA have serious flaws.  While attempting to solve the piracy problem for one segment, these bills create unsustainable burdens for an equally important segment of the economy – the technology sector.  If enacted, these measures might temporarily dent piracy, but at a terrible and unnecessary economic and social price."

In the last several weeks, a number of Senators and Representatives joined those already voicing their opposition to SOPA and PIPA.  Joining Senator Ron Wyden (D-OR) and others in opposition to the bill this week have been Senators Scott Brown (R-MA), Mark Udall (D-CO), and Mark Kirk (R-IL). On the House side, Representatives Jared Polis (D-CO), Zoe Lofgren (D-CA), Darrell Issa (D-CA) and others were joined in opposition by two original cosponsors of SOPA, Reps. Ben Quayle (R-AZ.) and Lee Terry (R-NE).

Additionally, the White House has also weighed in on SOPA and PIPA issuing a blog statement saying that the President believes that online piracy is a problem but that PIPA and SOPA go too far. The statement was authored by Chief Technology Officer Aneesh Chopra, OMB Intellectual Property Enforcement Coordinator Victoria Espinel and Howard Schmidt, special assistant to the president and cyber security coordinator for National Security Staff. They call on opponents of the legislation to find solutions that both sides can agree on.

The momentum of the legislation is clearly slowing and we are optimistic that Congress will rethink these bills. However, political momentum can shift easily so continuing our efforts is important.   The NVCA public policy team has been meeting with members of the House and Senate to share our concerns and urge political leaders to design and enact thoughtful legislation that guarantees the three goals of open information, frictionless commerce, and rights protection.  We have also convened a subgroup of NVCA members to work more closely on this issue and try to find solutions to the most problematic sections of the bills.  We will keep you apprised here at NVCA as developments occur.

As the race for the Republican Presidential nomination moves into high gear, we have all seen both the media and the competing campaigns turning their focus to Mitt Romney and the time he spent at Bain Capital. Unfortunately, much of the coverage has created significant confusion regarding the difference between venture capital and private equity. While NVCA does not endorse presidential candidates, and we have not and will not comment on Mr. Romney or any other presidential candidate's credentials, we must and will engage the media in the discussion about what venture capital is and is not.

Of particular importance is accurately communicating venture capital's unwavering commitment to job creation and innovation - and the fact that we work with entrepreneurs to create and grow new companies, characteristics that distinguish our asset class from all others. To that end, you can expect to see NVCA focusing in the coming weeks and months on educating the press, campaign staff, and Capitol Hill on these notable differences and encouraging our members to take every opportunity to talk about what they do each day to help grow their promising portfolio companies. 

In this morning’s Exit Poll release by the NVCA and Thomson Reuters, we were deliberate in making the point that despite the Q4 momentum, the venture-backed IPO market did not recover in 2011. In fact, it still has quite a way to go before we declare a healthy IPO market.  Here at NVCA, we are focused on the NUMBER of offerings rather than the total offer amount as our country needs MORE public companies – not necessarily bigger ones. 

Aside from the need for more IPO volume, here are a few other trends that 2011 data suggests:

Bulge Bracket Banks Still Dominate:  Morgan Stanley served as the book manager or co-manager for the most venture-backed IPOs in 2011 at 17 followed by Goldman Sachs and JP Morgan (14 each), BofA Merrill Lynch (11), and Barclays Capital, Citi and Deutsche Bank (10).  Boutique banks had a smaller showing with 1 or 2 IPOs apiece.

Continued Competition Among the Exchanges:  The NVCA views competition among the exchanges as a positive and 2011 did not disappoint. The NYSE listed 33 percent of the offerings in 2011 including Renren, Kosmos Energy and LinkedIn.  This compares to 36 percent of the listings in 2010 but 12 percent in 2007.  NASDAQs biggest offerings of the year were Yandex, Zynga, GroupOn and HomeAway. 

Foreign IPOs Still a Presence, Though Less So than in 2010:  The largest IPO of the year was Russian company Yandex, at $1.3 billion followed by U.S.-based Zynga at $1 billion.  Foreign IPOs accounted for one quarter of the 2011 listings compared with 37 percent of the listing in 2010.  The drop in percentage was driven by fewer Chinese companies listing this year (9) versus last year (25).

Domestic IPOs Bring Economic Promise to Regions:  Domestically, the most IPOs came from California-based companies with 21 followed by Illinois, Texas and Massachusetts (3 each), and Indiana and Colorado (2 each).  Other states that had an IPO were Connecticut, Washington, Iowa, New Jersey and Utah.  It can’t be stressed enough how important these IPOs are to a region’s economy.

Promise Abounds for 2012:  The pipeline is full with 60 venture-backed companies cuurently in registration.  If all of these companies actually go out we will need another 40 or more to join them to declare a strong IPO year for 2012.

For more IPO data and information, feel free to contact NVCA.

Comprehensive immigration reform may be bogged down in election year politics, but the issue of high skilled immigration is making some headway in Congress.  In late November, the House of Representatives passed a bill (by an overwhelming margin of 389-15) sponsored by Rep. Jason Chaffetz (R-UT) entitled the Fairness for High-Skilled Immigrants Act (HR 3012). The legislation would eliminate the per country numerical limitation for employment-based Visas and increase the per country numerical limitation for family-based immigrants from 7% to 15% of the total number of family-sponsored visas. The family-based Visa provision is important because often an entrepreneur is able to get a Visa, but it is difficult for his or her family to come to the U.S., so this measure would loosen the ability for that family to relocate together.  The measure is awaiting action in the Senate.

In other immigration news, Reps. Adam Schiff (D-CA) and Charlie Bass (R-NH) recently introduced legislation that would help foreign born students with STEM degrees from U.S. universities to remain here to start a business.  Their bill, the INVEST Act (HR 3692), would create as new Visa category that would grant permanent residency to an immigrant entrepreneur who starts a new business, creates two new jobs or invests $200,000 after two years; and creates five jobs or invests $500,000 in the business within five years. According to Reps. Schiff and Bass:

“The INVEST Act will allow highly skilled entrepreneurs the opportunity to build the next great company and to do it in America. Our universities are educating the next generation of Steve Jobs – we want to make sure they build the next Apple in the United States and not overseas.”

NVCA has issued its comment letter to the Financial Accounting Foundation on FAF’s draft plan to make private company financial reporting standards more relevant and useful. NVCA supports the overall plan and makes suggestions for improvements in governance, accountability, and structure. The draft plan issued in early October, is in response to the recommendations of the Blue Ribbon Panel (BRP) created by FAF over a year ago.  The BRP made a number of recommendations for bringing more focused attention to the specific needs of private companies which are often quite different from those of the stakeholders in public companies.

NVCA believes that the current one-size-fits-all approach to accounting principles, standards, and disclosures results in significantly added costs and efforts for its member firms and the high-growth, high-promise companies they invest in. Much of the resulting required reporting, established partly for public company investors and creditors, is irrelevant to private company stakeholders.

NVCA and its members plan to speak out on the plan at the roundtables scheduled by FAF.  We look forward to working with FAF leadership as it finalizes the structure and format for the new group.

The Financial Accounting Foundation is the parent organization of the Financial Accounting Standards Board (FASB) which is the designated organization in the private sector for establishing standards of financial accounting that govern the preparation of financial reports by nongovernmental entities. Those standards are officially recognized as authoritative by the US Securities and Exchange Commission (SEC).  For more information, please contact me at jstaylor (at) nvca (dot) org.