On any given day in our nation’s capital, you’ll find many lawmakers touting the benefits of entrepreneurship. Unfortunately, this enthusiasm is all too often forgotten when it comes to our nation’s tax policy, which often either ignores or is outright hostile towards startups.
That is why when legislation does gain traction to massage the tax code to the benefit of startups and their employees, it’s worth cheering from the hilltops. As I write, there is legislation quietly making its way through Congress that could take a very productive step towards creating a tax code that supports entrepreneurship. (more…)
The growth of the modern venture capital industry can be traced back to the 1970s, when several significant policy changes encouraged long-term risk investment in startups.
These policy changes included reductions in capital gains rates and relaxed standards on where corporate pension funds could invest, allowing them to participate in a wider range of asset classes, including the nascent venture capital industry.
These simple but critical changes in policy made 1978 the first year the venture industry saw a significant fundraising period, raising $750 million to invest in innovative startup companies and beginning the rise of venture capital in the United States. (more…)
By Bobby Franklin and Venky Ganesan
The political hysteria surrounding the small but complex issue of the tax treatment of carried interest reached new heights this past week as both Donald Trump and Hillary Clinton called for its demise.
Carried interest allows managers of some private investment funds (such as hedge funds, private equity and venture capital) to pay a lower rate on profits from investment gains than most individuals do on ordinary income.
While many different factors have converged over time to create America’s leadership in innovation, significant credit is due to our long-standing tax policy that supports the spirit of entrepreneurship. It’s alarming that each candidate would be so quick to throw something that motivates investors to pour money into start-ups onto the garbage heap. Given their populist-driven rhetoric to increase taxes on start-up investment, it seems appropriate to set the record straight and explain its fundamental role in the American entrepreneurial ecosystem. (more…)
By Sam Cohen, Tim Curt and Sandy Grippo
Many participants in the venture capital industry are familiar with Section 1202 of the tax code, which contains the Qualified Small Business Stock rules. These rules can provide a valuable exemption from capital-gains taxes for patient investment in early-stage startups. In addition to encouraging direct investment in startup companies, the provision also has the potential to be a powerful incentive to directly encourage entrepreneurial activity because it applies to founder’s stock. But despite its valuable appearance on paper, QSBS is dramatically underutilized in the entrepreneurial ecosystem. (more…)
When I took the helm of NVCA in September 2013, I accepted the position not as a venture-capital expert but as someone who knew how to get things done in Washington. To get up to speed on this dynamic industry, I took to the road to meet with and learn from as many venture experts as possible.
Through my travels, I learned that the venture-capital industry is part of a complex and intertwined Web of entrepreneurs, investors, innovators, academics, researchers and many others. The inextricable components of this Web make up the entrepreneurial ecosystem, the linchpin of success for our members and for American innovation. (more…)
Nearly $60 billion in venture capital was deployed to the U.S. entrepreneurial ecosystem in 2015 to help grow innovative startup companies providing products and services ranging from cyber security technologies to online lending marketplaces to Web-based educational courses and everything in between.
Many of these companies and their predecessors are making great strides in advancing innovation around the globe, but that’s only a small part of the venture capital story and its impact on our lives, our society and our economy. (more…)
We are now one month out from that cold winter night when Iowans will caucus for their presidential candidate of choice, setting in motion the cross-country voting marathon that will determine the candidates who will be placed before the American voters next November. As the race to select our next commander in chief reaches a fevered pitch, it’s important to explain how we view NVCA’s role in the 2016 presidential sweepstakes.
As has always been the case throughout our forty-plus year history, NVCA does not endorse or actively campaign for individual candidates running in the primary or general election for either party. However, that’s not to say we sit by on the sidelines letting history play out before our eyes without engaging in the most consequential choice our country makes every four years. (more…)
“Creative Destruction,” a term coined by economist Joseph Schumpeter almost 75 years ago, is the fundamental foundation of venture capital, driving financial returns to LPs, wealth creation to entrepreneurs who re-invent industries, and job creation in the global economy.
So what will be the force of Creative Destruction in the industry of venture capital?
A prediction: 2016 is the year that the pro-rata rights ecosystem begins to institutionalize and shakes up our industry. (more…)
The modern day venture capital industry has come a long way since the early 1960s when venture legends Bill Draper and Pitch Johnson founded Draper & Johnson Investment Company. No longer are we a cottage industry tinkering around the edges of our economy. Although we remain small in size compared to the broader private equity industry, we play an outsized role in the U.S. economy through company generation, job creation and overall economic growth.
As our industry has grown and matured over the last 50-plus years, so, too, have the markers that define where venture capital starts and where it ends. From the recent rise of crowdfunding platforms and angel investors to growth equity and direct investments from institutional investors, many new and different players have emerged as active and engaged participants in the venture capital ecosystem. (more…)
If you were able to join us for VentureScape 2015 in May, you likely heard a lot of discussion about patent reform. The issue is receiving a tremendous amount of attention in Washington and has been identified as one of the few areas where President Obama and congressional Republicans can find common ground.
Because many of our members invest in patent-dependent startups, NVCA has been on the frontlines of the debate in Congress and actively engaging with lawmakers to strike the right balance of curbing abusive behavior by patent trolls and other bad actors while also protecting the rights of patent-reliant startups that depend on strong patent protections to ensure their survival. (more…)