Mon 21 Nov 2011 |
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This evening, the bipartisan Congressional Supercommittee which was tasked with presenting a plan to reduce the national deficit, announced that it has failed to meet its deadline, triggering $1.2 trillion in automatic discretionary defense and non-defense spending cuts effective January 1, 2013. While many will say that this failure was certainly not in the country's best interest, it leaves the venture capital and start-up communities unscathed for the time being. A change to carried interest tax policy was discussed during super committee meetings, but the issue never rose to the level where the industry was threatened. In this regard, we are relieved that the issue is off the table for 2011. Thus, for tax year 2012 it is unlikely we will see a change in the current carried interest tax provisions which would impact tax year 2012 rates.
It needs to be noted that the mandatory spending cuts now set to take place may, in practice, not be "mandatory" at all as they are not scheduled to go into effect until January of 2013. Much can happen in the next 13 months to change this path, including Congress engaging in full scale tax reform which could result in raising revenues. Under this scenario, larger issues such as capital gains tax policy and partnership tax law will likely be addressed.
Additionally, the failure of the Supercommittee continues to create a strong amount of uncertainty regarding the US economy and that uncertainty could impact the capital markets. At a time when companies are beginning to go public again -- after a difficult few months -- the last thing we need is a slamming shut of the IPO window, leaving a large number of companies in registration limbo. At 49 IPOs for the year, we are well below the IPO levels needed to declare the market healthy.
So while we are thankful that there will be no carried interest tax change this year, challenges still loom large for the venture industry on Capitol Hill and in the overall market. The NVCA remains vigilant on these and other issues as Congress continues to struggle with consensus and progress.
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Fri 04 Nov 2011 |
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NVCA Board Member and Chairman-Elect Ray Rothrock of Venrock testified on Nov 2nd before the House Subcommittee on Technology and Innovation at a hearing entitled, “Creating and Growing New Business: Fostering U.S. Innovation.” The hearing sought to explore the current state of new, innovative companies and examine obstacles that limit these companies from rapid growth.
Ray focused his testimony on the recently released Rebuilding the IPO On-Ramp report as well as MedIC's Vital Signs Report. These reports make the case for capital markets and FDA reform respectively.
Another key element of Ray’s testimony centered on the important role that the federal government plays in funding basic research. Several members of the subcommittee have expressed skepticism about programs such as ARPA-E (the Advanced Research Projects Agency for Energy) but Ray asserted without programs like this, the U.S. will cede our technology leadership to other nations that are investing billions of dollars into basic research to develop new energy technologies.
The hearing also centered on issues around high-skilled immigration and access to STEM educated talent from around the globe. Ray discussed the Start-Up Visa Act which would allow foreign born entrepreneurs who raise venture capital and create U.S. jobs to receive permanent Green Card status.
The subcommittee was also interested to learn more about the importance of Small Business Innovative Research (SBIR) program. Ray testified to NVCA’s position that venture-backed companies become eligible for these important early stage grants.
We applaud the House Science Committee for their examination of the many issues that impede U.S. innovation and company growth. We are pleased to see that they are interested in a comprehensive look at how the innovation ecosystem works and the role that they can play in fostering a better environment for entrepreneurs and start-up companies. |
Thu 20 Oct 2011 |
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Written by Jennifer Connell Dowling
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Today, the IPO Task Force, a group of private sector professionals operating in the emerging growth company ecosystem, released formal recommendations to help re-energize the U.S. capital markets system. Spearheaded by former NVCA chairman, Kate Mitchell, the task force authored a detailed report entitled Rebuilding the IPO On-Ramp: Putting Emerging Growth Companies and the Job Market Back on the Road to Growth which outlines three major areas in which government can help smooth the path to IPO for these important companies. A summary presentation is also available.
Since the implementation of the 2002 Sarbanes Oxley Act, the 2003 Spitzer Global Settlement, and the subsequent decline in small company IPOs, a number of well respected groups have offered recommendations to address this growing challenge for U.S. economic growth. Unfortunately, without a bipartisan consensus on the depth and breadth of the problem, the political environment was not conducive to real action. This time is different. The data on the decline in the IPO market is incontrovertible. Similarly, the political leadership of both parties recognizes the link between the startup economy, the IPO market, and ultimately job creation. The recommendations put together by this task force are reasonable and actionable and will not compromise investor protection or investor participation. A key component to the proposal is a laser sharp focus on a specific type of company -- the emerging growth company -- which has been proven to be best poised to create jobs after an IPO. The On-Ramp report will be the first time this class of companies is defined and targeted for support.
In our initial briefings with members of Congress, regulators and the Administration, there is a great deal of interest in the On-Ramp recommendations. NVCA will work with the IPO Task Force to ensure the recommendations are part of the building dialogue around legislative and regulatory initiatives to address the capital markets. Of the myriad of policies being considered by Congress currently to jump start the economy, improving the U.S. capital markets system is one both political parties should embrace.
The NVCA encourages all interested parties to review the On-Ramp report. We thank the members of the IPO Task Force for the tremendous amount of time and effort they gave to this project on behalf of emerging growth companies.
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Fri 07 Oct 2011 |
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Yesterday marked a significant milestone in the advocacy efforts of NVCA’s Medical Innovation and Competitiveness (MedIC) Coalition as we released on Capitol Hill the results of a comprehensive survey of venture capital firms investing in healthcare. The report, Vital Signs: The Threat to Investment in U.S. Medical Innovation and the Imperative of FDA Reform, revealed that US venture capitalists are reducing their investment in biotechnology and medical device companies and shifting focus overseas to Europe and Asia, primarily due to regulatory obstacles at the Food and Drug Administration.
The report has captured the attention of Congress and we were joined at our press conference by Senator Michael Bennet (D-CO), Senator Richard Burr (R-NC) and Representative Michael Burgess (R-TX), all of whom showed strong bi-partisan support for meaningful FDA reform which demonstrates a commitment to innovation. We also were joined by Margaret Anderson, Executive Director of FasterCures, an organization whose mission is to accelerate the progress of discovery and development of new medical solutions for deadly and debilitating diseases.
Our report follows on the heels of an FDA Report released Wednesday, Driving Biomedical Innovation: Initiatives for Improving Products for Patients, which summarized steps that the agency has been taking to improve approval processes. While we are heartened to see the FDA is now focused on an innovation agenda, we continue to assert that words are not enough and we must begin to see real action. Senator Bennet agreed yesterday stating:
“At a time when our drug, biotechnology and medical device startup companies are struggling to access capital in this economy, we must strive to provide them with regulatory clarity and predictability in a way that is safe for patients but also helps foster innovation….. The FDA has taken steps towards this. I was pleased to see their Innovation Initiative yesterday. But we have to do more and expect more for our patients and the people who spend their lives trying to help them.”
In conjunction with the press conference, NVCA/MedIC members spent significant time on Capitol Hill this week meeting with members of Congress and top Administration officials on the survey and its recommendations. These recommendations include a well resourced FDA that is sharply focused on improving the predictability, clarity and transparency of the approval process as well as one that is committed to a culture of innovation. There is a growing groundswell of bipartisan and bi-cameral support for change, and we plan to carry this momentum forward in the coming months. The ramifications of inaction, as the study suggests, are far too concerning. We must take immediate steps or we risk harming patients and losing our leadership position in medical innovation and economic growth. |
Mon 26 Sep 2011 |
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On September 26, Dr. Sharon Stevenson, co-founder and managing director of Okapi Venture Capital, testified on behalf of NVCA at a House Energy and Commerce field hearing in San Diego on the “Impact of Medical Device and Drug Regulation on Innovation, Jobs and Patients: A Local Perspective.” A copy of her testimony is posted on NVCA’s website.
Dr. Stevenson did an excellent job articulating that the long-standing and effective venture capital investment model in medical innovation is under siege. If left unaddressed, the situation will have significant negative consequences for U.S. patients and the economy overall.
She explained that although there are a number of drivers that have contributed to the decline in life sciences investment, the uncertain regulatory process is one of the biggest contributing factors. Dr. Stevenson also described several steps that could be taken to correct this situation and restore a balance between benefit and risk assessment. This balance has underpinned the therapeutic advances which have changes patients’ lives and contributed to our nation’s leadership in medical innovation.
The hearing marked the third time this year that Congress has asked NVCA/MedIC to testify on the impact that FDA regulation is having on the advancement of medical innovation. Jack Lasersohn of The Vertical Group, testified before the House Government Reform Committee in June and Jonathan Leff of Warburg Pincus, testified before the House Energy and Commerce in July. Both their testimonies are also posted on NVCA’s website. |
Wed 14 Sep 2011 |
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Today the House Subcommittee on Immigration and Policy Enforcement held a hearing entitled “The Investor Visa Program: Key to Creating American Jobs.” The NVCA was fortunate to have not one, but two members testify in support of the StartUp Visa legislation. Foundry Group Managing Director and NVCA Board member Jason Mendelson was joined by Menlo Ventures Managing Director and StartUpVisa.com co-founder Shervin Pishevar in asserting that the United Statesneeds immigrant entrepreneurs to grow our economy and create jobs and that Congress must pass the StartUp Visa legislation soon or we risk losing these important individuals (and their companies) to other countries.
In his testimony, Jason stated that the StartUp Visa program is not a nicety but a necessity to U.S. economic growth:
"At a time when we are in desperate need of both fiscal responsibility and economic stimulus, the StartUp Visa Act will create American jobs at no cost to the federal government. Each day that passes without this legislation, another company builder is turned away and jobs are created elsewhere. On behalf of the venture capital and startup communities, I urge Congress to send the message that our country is “open for business” and eager to welcome job creating entrepreneurs to our shores."
Shervin offered his perspective as a venture capitalist and immigrant entrepreneur:
"The StartUp Visa legislation applies two very important filters so that when the United States accepts an immigrant entrepreneur who has received venture investment, we are getting the best and brightest candidates from around the globe. First, there is the self selection filter which applies to any individual enterprising enough to leave one’s home and attempt to innovate and grow a business in a new country. The second filter is the venture capital vetting process which only funds those companies that have the highest chance to succeed. The result will be creating a network of highly motivated, well supported entrepreneurs who will generate value."
Both Jason and Shervin urged Congress to pass the StartUp Visa legislation on its own merits and not get caught up in comprehensive immigration reform any longer.
Subcommittee Chairman Gallegly and Ranking Member Lofgren were both very appreciative of our witnesses and there appears to be bipartisan support for this legislation. For the NVCA’s part, we were pleased to be able to put two very strong voices behind the effort to move this bill forward. |
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