WASHINGTON, DC – The National Venture Capital Association (NVCA) recently made formal recommendations in the Commerce Department’s rulemaking process to define so-called “emerging technologies” that will be subject to export controls. These newly defined emerging technologies will also feed directly into the Foreign Investment Risk Review Modernization Act (FIRRMA) process, and certain investments into these types of companies may trigger a CFIUS filing. In announcing the comment period, Commerce asked for feedback on 14 categories that includes AI/machine learning, 3D printing, biotechnology, and several other technology areas that are major focuses of U.S. startups and venture investment.

“American innovation could be seriously hampered unless the Commerce Department acts with precision in classifying emerging technologies,” said Bobby Franklin, President and CEO of NVCA. “A targeted approach is needed in this rulemaking. By categorizing only those technologies that have significant defense uses – and not those that merely have broad commercial implications or incidental national security significance – as emerging technologies, the government can ensure the impact on American scientific and technological advancement is minimized while still protecting important national security interests.”

In its submission, NVCA emphasizes three key points: (1) Venture capital is the single largest driver of emerging U.S. company innovation and draws on capital and talent from across the world. An overbroad definition of emerging technologies (thus an overbroad application of FIRRMA) may have devastating consequences for the innovation economy. (2) Many of the representative general categories of technologies listed in the request for comments are not yet well-defined. Because technologies that could be deemed to fall into those categories are widely used across many emerging technology companies, a broad set of controls could sweep in many unintended target companies and technologies. (3) The case for investing in many U.S. emerging technology companies relies in many circumstances on their ability to find talent and worldwide commercial markets for their innovative products. To the extent that the new rules prevent U.S. companies from accessing that talent and those markets, global venture capital may well redirect to innovators in other nations.

In addition to NVCA’s comments to the Commerce Department, it has also provided input to the Treasury Department about its pilot program under FIRRMA. On November 7, NVCA filed comments that asked for clarification in ten areas that have caused unneeded confusions for venture capitalists and high-growth startups.

Read the full submission here.