Last week, the state of Virginia provided us with a model example of what can happen when venture capitalists work together directly with elected public officials and other stakeholders to make smart public policy.
Last Tuesday, Gov. Bob McDonnell signed legislation that creates a three-year window under which entrepreneurs and investors can start and invest in early stage technology companies in Virginia without having to pay any long-term capital gains taxes on the returns those companies generate. The law’s goal is to attract more high-growth-potential start-ups – and the hundreds of thousands of jobs they may create – to the state.
This legislation grew out of close coordination between the governor’s office, the state legislature and local venture capitalists and entrepreneurs. John Backus, a managing partner at New Atlantic Ventures, served as co-chair of Gov. McDonnell’s tech policy transition team. John’s working group made the idea behind the legislation its top policy recommendation to the governor.
From there, members of Northern Virginia Technology Council worked directly with lawmakers from both houses of the Virginia Legislature to introduce the bill. Representatives of the local VC and tech communities – including John – testified in Richmond on behalf of the legislation, which sailed through the House and Senate finance committees.
In addition to the potential job creation, Virginia residents stand to gain in a number of ways. First, the legislation addresses the state’s budget issues by attempting to grow its economic base – not by raising taxes and/or cutting services. Second, the policy only costs the state money in the long-term if the start-ups grow and generate value starting today. Third, it’s simply cheaper to attract new companies – and the jobs they bring –to the state when they are young, or grow them yourself.
By building close relationships with elected officials in Virginia, VCs and entrepreneurs have taken a significant step toward improving the climate for innovation and venture investment there. In effect, it’s a microcosm of what NVCA works toward every day on Capitol Hill. Thanks to the Virginia VC and tech communities, we have one more example at which to point.
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