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22

Oct

2013

TRANSFER Act Aims to Aid Tech Transfer between Labs and Startups PDF Print E-mail

Emily Baker

Written by Emily Baker   
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Throughout its history, NVCA has strongly supported the allocation of federal funds for research at universities, nonprofit research institutes and federal laboratories. That’s because America’s entrepreneurs often take the groundbreaking discoveries generated in these settings today and turn them into the life-saving and life-changing products of tomorrow. However, this process can only take place if the innovative breakthrough is transferred successfully from the lab to a startup that can develop it and bring it to market.

In recent years, this transfer has become increasingly difficult. Specifically, a funding gap has emerged between the discovery stage for transformational technologies and their commercialization. This gap has slowed or blocked the path to market for countless innovations. Fortunately, help may be on the way in the form of the Technology and Research Accelerating National Security and Future Economic Resiliency (TRANSFER) Act of 2013. The TRANSFER Act aims to address the funding gap directly by enabling faculty and researchers at America’s research institutions to undertake proof-of-concept, scaling up, and modeling research for technologies that many investors may consider too early-stage to fund.  NVCA believes that this will help fill the funding gap and speed new research discoveries more efficiently to the marketplace, where they can benefit all Americans. In the process, it will increase the impact of every federal dollar spent on research, spur the creation and growth of innovative startup companies, and generate jobs and economic growth.

NVCA commends The House Science Committee for its bipartisan work on this legislation – including its Chairman Lamar Smith (R-TX) and Ranking Member Eddie Johnson (D-TX), and the leadership of the Research and Technology Subcommittee Chairman Larry Bucshon (R-IN) and Ranking Member Dan Lipinski (D-IL) - for its work on the TRANSFER Act of 2013. The committee’s commitment to dialogue and stakeholder engagement has produced a bill that is practical, measured and capable of drawing broad bipartisan support. For these reasons, NVCA looks forward to the opportunity to assist and support the passage of this bill in any way it can.
 

18

Oct

2013

There’s Reason for Optimism in Q3 MoneyTree Report PDF Print E-mail

John Taylor

Written by John Taylor   
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Amidst the talk of economic gloom and doom in D.C. this week, the MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters, provided some encouragement for venture capitalists, innovators and entrepreneurs. Early Stage dollar investments rose to their highest level in 12 years, rising 7 percent in dollars and 8 percent in deals.  In fact, Seed/Early stage deals accounted for 58 percent of total deal volume in Q3, a record percentage for a single quarter. (Full data can be accessed here.) These figures bode well for the future of innovation. 

The strong investment numbers in the Software sector also provide cause for optimism. Software investment in the third quarter reached $3.6 billion, which marks the first push over $3 billion for a quarter in 12 years.  The Software industry also counted the most deals in Q3 at 420, a 23 percent increase from the 342 rounds completed in the second quarter of 2013.  Finally, nine of the 11 largest investments in Q3 went into Software companies. These numbers speak to the continued preference of investors for deals that require less capital to get to proof of concept. That’s good news for software companies, of course, but less encouraging for more capital-intensive sectors.

The picture isn’t entirely rosy, however. While the next generation of companies may have gotten a healthy boost this quarter, many VCs are still trying to gain exits for the previous generation of companies. While this month’s Exit Poll report by Thomson Reuters and NVCA indicated some improvement on that front, we would like to see it strengthen even further. Unfortunately, uncertainty in Washington and in the public markets of the kind we witnessed earlier this week won’t help matters. That said, the strong showing in the Seed, Early Stage and Software sectors in Q3 suggests that VCs remain undaunted, and that the outlook for America’s startup ecosystem remains optimistic.
Last Updated on Friday, 18 October 2013 11:36
 

02

Oct

2013

FAF FAS 157 Review: NVCA CFO Task Force Strongly Encourages Needed Changes to the Rules PDF Print E-mail

John Taylor

Written by John Taylor   
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One of the top priorities of the NVCA CFO Task Force is to engage the Financial Accounting Foundation (FAF), the parent organization to accounting policy-maker FASB, as it undertakes a post-implementation review (PIR) of the fair value measurement and reporting rules. This rule set is widely known by its original name, “Financial Accounting Statement 157” or simply “FAS 157.” NVCA CFO Task Force members have been working at multiple levels to encourage a thorough review of this standard, which became effective in 2008. Since then, annual audit costs and efforts have grown far beyond what we believe the policymakers intended. It is not clear how much of the issue for U.S. venture capital firms is (a) the application of the standard by some auditors, or (b) the standard itself. Regardless, NVCA members have reported escalating audit costs and team distraction. Thus, NVCA and other industry groups asked FAF to undertake this PIR. We hope it is a first step in getting necessary relief.

FAF’s PIR process takes the form of a survey conducted by a neutral third party to gather input from a number of constituencies. Many members of the NVCA CFO Task Force members participated in the survey and encouraged their investors to do so also.

This survey took place in mid-September. Results of the review will be presented to FASB by the end of the calendar year for review and response. We hope that the feedback that FAF receives will be sufficient for FAF to recommend that FASB revisit the FAS 157 standard in light of the unintended consequences of its application. The timing won’t have a direct effect on 2013 audits because the recommendations are scheduled for delivery to FASB for review before calendar year end, but FASB’s formal response is not expected until early in 2014. That said, the fact that FAF has launched this PIR at NVCA’s urging has galvanized a number of constituencies that favor change.

For more background on accounting rulemaking as it affects the venture capital industry, and specifics on recent history, please refer to Appendix I of the NVCA 2013 Yearbook.
Last Updated on Wednesday, 02 October 2013 14:45
 

25

Sep

2013

The SEC’s Proposed New Rules on General Solicitation PDF Print E-mail

Jennifer Dowling

Written by Jennifer Connell Dowling   
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Among the many bills packaged together in 2012 to form the JOBS Act was a measure that forced the Securities and Exchange Commission (SEC) to revisit its long-time ban on “general solicitation” – i.e. advertising – for private offerings.  Although it has taken the SEC more than a year to craft final rules lifting the ban, those new rules took effect on Sept. 23, 2013.

Throughout the legislative and regulatory phase of this debate, NVCA has kept a finger on the pulse of member opinion regarding this issue, and has found little interest in using the new general solicitation regime.  However, at its meeting in July of this year – the meeting at which the final rules were issued – the SEC asked for comment on additional proposed rules that deal with reporting requirements for firms that do generally solicit, as well as those that continue to operate under the “old” rules (no general solicitation.)

In our view, several aspects of the new proposal are troubling and could produce unintended effects on the industry.  First, the proposed rule would require ALL firms to file a closing amendment to their Form D within 30 days after the termination of a Rule 506 offering.  The proposal would also amend Form D, again for ALL firms, to require significant additional information including:

  • Identification of the issuer’s website
  • Expanded information on the issuer
  • The offered securities
  • The types of investors in the offering
  • The use of proceeds from the offering

Additionally, for 506(c) offerings (those using general solicitation), the Form D would have to include:

  • Information on the types of general solicitation used, and
  • The methods used to verify the accredited investor status.

Finally, the SEC proposal, if adopted without change, would require firms that do want to use general solicitation to file an initial Form D 15 days prior to engaging in any general solicitation, and would require, for the first two years, submission of written general solicitation materials.

Despite what we believe will be limited application of the new regime regarding our member firms, NVCA believes that the proposed additional requirements are an over-reach by the SEC in terms of the depth and breadth of material requested from both soliciting and non-soliciting firms. As a result, NVCA will file a formal comment letter with the SEC on these topics and further concerns.  We will post our comment letter on the NVCA website as soon as it is finalized.  For further questions, contact Jennifer Connell Dowling, NVCA’s SVP of Federal Policy at jcdowling@nvca.org.

 

19

Sep

2013

NVCA Presents: Managing a VC Firm PDF Print E-mail

Emily Mendell

Written by Emily Mendell   
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In May 2013, immediately following VentureScape, the NVCA gathered together seven veteran venture investors for a frank discussion about the challenges and opportunities of managing a venture capital firm today.  Sponsored by Wilson Sonsini Goodrich & Rosati , the roundtable discussion covered topics such as the right skill set for managing partners, mentoring, culture, time management, succession planning, LP relations, and decision making.

We captured the conversation, transcribed it, and today present to you a summary of the discussion that took place among:

Norm Fogelsong, Institutional Venture Partners
Diana Frazier, FLAG Capital Management (moderator)
Joe Horowitz, Jafco Ventures
Dick Kramlich, New Enterprise Associates
Bob Latta, Wilson Sonsini Goodrich & Rosati
Terry McGuire, Polaris Partners
Ray Rothrock, Venrock
Craig Taylor, Alloy Ventures

You will find that the document is a quick read with many insights.  Our hope is that this piece benefits both current managing partners as well as general partners who aspire to join their ranks.  You can download Managing a VC Firm here.  Please enjoy it with our compliments.

 

03

Sep

2013

Day 1 at NVCA PDF Print E-mail

Bobby Franklin

Written by Bobby Franklin   
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Dear Members and Friends of NVCA:

As you all return from what has hopefully been a productive and rejuvenating summer, so too do we at the NVCA, with a robust and exciting agenda for the coming weeks and months.  Today, the staff and I are gathered in Washington D.C. discussing our top priorities and strategies in the areas of policy, research, communications and membership.  Today is officially my first day as President and CEO of the association, and I couldn’t be more enthusiastic about the promise that lies ahead.  It is a privilege to lead an organization comprised of individuals and firms that fuel the innovation economy, drive job creation and company growth, and change the way in which we live and work for the better.  Ours is a story worth telling – here in Washington D.C. – and across the country and I am looking forward to sharing that narrative with critical stakeholders and influencers who matter to the future of our ecosystem.

So what can you expect from me?

In my previous position with CTIA -The Wireless Association®, we had a motto which was simply, “Listen, Learn, and then Lead.”  My first 90 days as NVCA President and CEO will be committed to hearing from members, staff and other industry participants regarding the most pressing challenges and opportunities for your firms and portfolio companies – some of which I am already very much aware of and others I have yet to learn.  I hope to meet many of you in person as I begin to attend events across the country and immerse myself in the industry.  I will be working closely with NVCA President Emeritus Mark Heesen, our Board of Directors, and the very capable NVCA staff in setting a course for the coming year.  And I encourage you to reach out to me and share your thoughts and concerns about the future of the NVCA and the venture capital industry.

As always, there is much work to be done but I am confident we are building on a very solid foundation which would not have been formed without the support of our members.  Please expect to hear from me often – and I hope I can count on you to do the same.

 
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