Venture Capital Regulatory Hot Buttons: Innovation or Guild Agenda?

I was asked last week at a seminar what the “regulatory hot buttons” were for venture capital firms.

My response was to tick off at least these:

1)      End or reduce the impact of Sarbanes-Oxley.  This legislation is a tax on public companies without significant protection for the public, and is widely blamed by VCs for the wretched IPO environment of the past almost-decade.

2)      Don’t mess with capital-gains tax treatment for carried interest.  Carried interest is the way that profits from successful startup investments convey to venture capitalists and our backers.  Treating these as ordinary income would be another tax on innovation.

3)      Visa reform.  By restricting talented scientists, engineers, and entrepreneurs from study, work, and citizenship opportunities in the U.S. we cut ourselves off from the historic stream of human capital that immigrants have furnished to the U.S.

I found myself thinking after the class, “Is this a true innovation agenda, or is it just a set of guild protections for what we do”?

What do you think?  I came to the conclusion that these are actually in the interests of the innovation agenda as a whole.

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About the author

an Gordon is Research Director for Valhalla Partners, a Northern Virginia venture capital firm. Dan has twenty-eight years experience working with technology, as a computer scientist, software developer, manager, analyst, and entrepreneur. Prior to joining Valhalla Partners, Dan was a Director and senior staff member at the PricewaterhouseCoopers Global Technology Centre, analyzing technology trends and consulting on technology-oriented strategies in the software, e-business, wireless, optical, networking, semiconductor IP, and life sciences arenas. He worked with clients from North America, Europe, the Middle East, and Australia. Dan was a Contributing Writer and Contributing Editor to the Technology Centre’s annual Technology Forecast, and a frequent speaker at industry and general business meetings. Before joining PwC, Dan spent 20 years in Silicon Valley as a software technologist, manager, director, and entrepreneur, including senior technical roles at well-known Silicon Valley firms like Symantec, Intuit, and Oracle. Dan has also been involved in startup companies in the applied Artificial Intelligence and Web applications fields. Dan has a B.A. (cum laude) from Harvard University and an M.S. from New York University in Computer Science. He is a Professional Member of the IEEE and ACM. Dan lives in Washington, D.C. with his wife and two children.
  • DavidBBlack

    Whatever you tax, you get less of it; whatever you reduce taxes on, you get more of it. Similarly, by increasing the regulatory burden on public companies, you get fewer companies wanting to IPO. Each of the 3 items reduces taxes or reduces regulatory burden on VC-based innovation. If we want more innovation, we should want these things. If at the same time they benefit the VC guild, that’s life.