It only took four years, eight months, and ten days, but the International Entrepreneur Rule (IER) is now set to unleash new entrepreneurial energy in the United States. It is said that good things come to those who wait. But waiting is not enough in policy advocacy: IER is here today due to a sustained campaign of support from NVCA and others across the startup ecosystem. Read more
https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png 0 0 Jeff Farrah https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png Jeff Farrah2021-05-11 13:28:002021-05-11 13:28:00The International Entrepreneur Rule – At Long Last
https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png 0 0 Justin Field https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png Justin Field2021-04-23 16:29:012021-04-23 16:29:01The American Jobs Plan and the Startup Ecosystem
One of the central strategies of the American Jobs Plan is to use increased innovation activity to make progress on three critical societal challenges: climate change, access to economic opportunity, and competition with China. The bill seeks to accomplish this by using government resources to seed commercial activity through research programs, education and training, facility construction, and support for entrepreneurship, among other proposals. Read more
https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png 0 0 The American Startups and Job Growth Coalition https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png The American Startups and Job Growth Coalition2021-04-21 16:52:372021-04-21 16:59:56Venture Capital Investment at Work
Venture capital investment is often associated with job creation and higher wages, innovation, and economic growth, as numerous studies have found. A primary reason for this is the power of equity investment, where investors aligned with the long-term goals of a growth company provide capital to finance activities that lead to value creation over a period of years. We have been interested in learning more about the activities VC-backed companies prioritize to create this growth, so we conducted a survey to identify broadly what happens with venture capital investment once companies receive capital.
The findings, which we are sharing in this post for the first time, are striking. The survey results show that four out of five respondents spent at least 70 percent of their budgets on two activities, wages and compensation and research and development. This statistic highlights the extent to which venture capital finances job creation and innovation despite the risks inherent in funding companies expected to operate in revenue loss positions for years. 57% percent of companies surveyed responded that at least half of their total annual expenses were devoted to compensation, while 48% of companies spent at least 60% of total annual expenses on compensation. These percentages illustrate that startups and growth companies devote considerable amounts of the funds they raise to compensating their workforces.
Innovation is closely linked to productivity growth, a key source of economic growth and essential to progress in living standards. For this reason, the percentages of capital deployed to finance research and development amongst respondent companies are particularly notable. A remarkable 40% of companies reported spending upward of 50% of annual total expenses on research and development (R&D), 30% of companies spent more than 60%, and nearly a quarter (23%) of companies spent more than 70% on R&D.
Data on R&D expenditures for large incumbent corporations provide a useful comparison for our survey data and reveal just how heavily VC-backed companies spend on R&D. In 2018, the average expenditure on R&D as a percentage of revenue for Fortune Global 500 companies was 21.6 percent. The largest spenders were companies in pharmaceuticals, telecommunications, and information technology, none of which spent more than 26% of their revenue on R&D, a percentage which would land them around the bottom third when compared to respondents of our survey. While not necessarily an apples-to-apples comparison (our survey looked at R&D as percentage of expenditures while data regarding incumbent corporations look at R&D as a percentage of revenues), it’s more fair to look at total expenditures for growth companies as they generally are in a loss position and many would report spending on R&D far in excess of total revenues.
There is some interesting variance in the types of investment by the age range of companies. Forty-four percent of companies less than five years old spend at least half of their annual budgets on R&D, while 33% of companies five years and older do so. Conversely, 66% of companies five years and older spent at least half of their budgets on wages and compensation, while 52% of companies less than five years old do. This reflects a common trend in the company building process where firms often shift from research and product development in the startup stages to workforce expansion and other scaling activities in the growth phases.
As we see the one-year mark of the pandemic coming near, policymakers must increasingly focus on policies that rebuild our economy in a manner that makes us stronger and more competitive for the future following this crisis. This data confirms that encouraging greater startup activity throughout the country will lead to greater job creation and innovation, establishing a stronger base on which to build for the future. In addition, with many of these companies exploring solutions to broader societal challenges such as climate change and agricultural sustainability, the COVID crisis, and access to education, policymakers can address economic competitiveness and many critical societal challenges concurrently.
The Innovation and Growth Now by Investing in Tomorrow’s Enterprises (IGNITE) American Innovation Act is a bipartisan proposal that accomplishes exactly these objectives. This bill will allow high-growth companies to monetize up to $25 million in tax assets, providing liquidity to these companies through the downturn that can be used for job creation and R&D efforts, creating jobs now in a way that strengthens our economic future. And much of the cost of this bill will be offset over time through higher tax payments should these companies become profitable.
For instance, Illinois-based battery maker, NanoGraf, is developing a technological breakthrough in the performance capacity of batteries. But long research cycles mean NanoGraf can’t rely on short-term profits to survive. This proposal will provide companies like NanoGraf with capital now that will create jobs and drive innovation, strengthening the domestic battery industry—which is currently concentrated largely outside the United States—thereby improving the nation’s energy independence.
This survey showing such high percentages of expenditures for compensation and research and development among the startups and growth companies that make up the innovation economy is yet another powerful argument that economic development in the 21st century must focus on new company formation. Here’s hoping policymakers can work together and use this engine of opportunity to make progress in the country, and allow entrepreneurs to lead our post pandemic economic recovery.
Click here to see the full survey results.
*The American Startups and Job Growth Coalition includes: NVCA, TechNet, BIO, the Medical Device Manufacturers Association (MDMA), AdvaMed, the Center for American Entrepreneurship (CAE), Angel Capital Association (ACA), and the Technology Councils of North America (TECHNA).
For press inquiries, please contact Devin Miller at firstname.lastname@example.org
https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png 0 0 Devin Miller https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png Devin Miller2021-04-20 17:12:152021-04-20 17:12:15VC Policy Pulse: The International Entrepreneur Rule with Yiannis Yiakoumis
Welcome to our VC Policy Pulse series, where we speak with a VC or founder on a policy issue that is having a major impact on the venture and startup ecosystem. Today, we’re speaking with the founder of a VC-backed startup about the International Entrepreneur Rule. Yiannis Yiakoumis founded Selfie Networks in 2017 and since then has raised VC financing from Bowery Capital, Lightspeed, and individual investors. Yiakoumis is originally from Greece and has been able to stay in the U.S. to build and continue to grow his company here through the International Entrepreneur Rule. We spoke with him about his immigration journey, utilizing the International Entrepreneur Rule, and what the rule could do for other founders who want to found new companies in the United States. Read more
https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png 0 0 Devin Miller https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png Devin Miller2021-03-30 12:06:152021-03-30 12:06:15VC Policy Pulse: Medical Device Coverage Reform with Vensana’s Justin Klein & Kirk Nielsen
Welcome to our VC Policy Pulse series, where we speak with VC investors on policy issues that are having a major impact on the VC and startup ecosystem. Today, we’re hearing from Justin Klein and Kirk Nielsen, co-founders & Managing Partners of Vensana Capital, about the effects of federal policy on medical device innovation in the U.S. and how reformed coverage policy for innovative technologies from the Centers for Medicare & Medicaid Services (CMS) could help advance new medical devices and accelerate access to these products for Americans. Read more
https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png 0 0 Jeff Farrah https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png Jeff Farrah2020-11-30 04:31:062020-12-01 05:31:33Creating the Next Moderna: What VC Offers the World and 3 Public Policy Lessons
The world has anxiously waited for encouraging news about COVID-19 vaccine candidates. Happily, this news came right before Thanksgiving, with Moderna reporting that its vaccine is more than 94% effective and Pfizer indicating that its vaccine was similarly effective. Read more
https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png 0 0 Devin Miller https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png Devin Miller2020-11-04 18:59:372020-11-19 02:10:09Venture Capital Fuels America’s Recovery: Infographic
At NVCA, we understand that venture capital powers the American economy, and we advocate that venture is a key component to keeping our economy strong through the COVID-19 pandemic fallout.
American startups are the most innovative companies in the world, and many that are backed by VC are currently using their resources and human capital to combat COVID-19. Large companies often dominate the headlines, but nimble high-growth companies are the ones re-defining the boundaries of science and technology. Some of these companies were previously in the healthcare space and have shifted their attention solely to addressing COVID-19, while others were previously in other sectors and have pivoted to do their part. Read more
https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png 0 0 Devin Miller https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png Devin Miller2020-09-29 16:50:002020-09-29 16:50:00VC Policy Pulse: the Volcker Rule with Mark Kvamme
Welcome to the first blog in our VC Policy Pulse series, where we speak with a VC investor on a policy issue that is having a major impact on the VC and startup ecosystem. Today, we’re hearing from Mark Kvamme, Co-Founder & Partner at Drive Capital and former NVCA Board Member, about the effects of the Volcker Rule on the startup ecosystem in the Midwest and how recent reform to the rule will increase VC investment and startup activity in the middle of the country. Read more
https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png 0 0 Devin Miller https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png Devin Miller2020-06-25 17:44:032020-06-25 17:44:038 VC-Backed Startups Helping Treat COVID-19
As the COVID-19 pandemic continues to impact the world, many U.S. VC-backed startups are helping fight the virus by developing, testing, and implementing treatments that can manage, alleviate, or even prevent the symptoms of COVID-19. The venture industry is proud to support these innovative companies by providing capital and strategic guidance that is essential to tackling the crisis. Read more
https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png 0 0 Devin Miller https://nvca.org/wp-content/uploads/2019/06/42865ff45b916762c541e2bffe9fa791b4165a45.png Devin Miller2020-05-28 15:23:142020-05-29 15:22:07How 10 VC-Backed Startups are Combating COVID-19
Many of America’s startups are currently researching and producing advanced technologies needed to fight COVID-19. Nimble, high-growth companies have frequently re-defined the boundaries of science and technology, and many startups are using their capabilities and expertise to find and develop the technology-driven solutions needed to get past this pandemic. Read more