Ben Veghte


Increased State Court Litigation and Class Actions Adversely Impact High-Growth Startups

WASHINGTON, DC – The National Venture Capital Association (NVCA) joined the Securities Industry and Financial Markets Association (SIFMA) and the U.S. Chamber of Commerce in filing an amicus brief with the Supreme Court of the United States in the case of Cyan, Inc., et al.  v. Beaver County Employees Retirement Fund, et al..  At issue is an increase in state court securities class action lawsuits that adversely impacts recently public venture-backed companies.  NVCA believes federal courts have exclusive jurisdiction over the types of cases at issue in this case.

“Fewer and fewer venture-backed companies are choosing to go public, and we should be doing all we can to make the public markets more hospitable to high-growth companies that want to access them to scale and grow,” said Bobby Franklin, President and CEO of NVCA.  “Unfortunately, a rise in state level securities litigation is taking us in the wrong direction, which is creating uncertainties for venture-backed companies that have either gone public or are considering going public.  The proliferation of class action lawsuits in state court has been a drag on the system and must be abated to maintain our competitiveness in the global financial markets and to encourage more entrepreneurial activity.”


The Securities Act of 1933 imposes liability on issuers and underwriters (and certain individuals and companies who control them) for false and misleading statements in securities offering materials.  While the ’33 Act has enhanced the integrity of the U.S. financial markets in certain respects, it also has created opportunities for abuse by class action plaintiffs’ lawyers who bring costly class action strike suits seeking a quick settlement.  In the five years since the California Supreme Court’s decision in Countrywide, thirty-eight class action lawsuits alleging claims under the ’33 Act have been filed in California state court.  Twenty-six of these cases have been filed in either San Mateo or Santa Clara county state court, in the heart of California’s Silicon Valley.  This exponential growth in litigation, and the fear of being hauled into state court in California to defend protracted and expensive class action lawsuits, has hindered startups and entrepreneurs in accessing the nation’s capital markets in order to raise the cash they need to launch and grow their businesses.

Click here to download the amicus brief.

About National Venture Capital Association

Venture capitalists are committed to funding America’s most innovative entrepreneurs, working closely with them to transform breakthrough ideas into emerging growth companies that drive U.S. job creation and economic growth. As the voice of the U.S. venture capital community, the National Venture Capital Association (NVCA) empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment. As the venture community’s preeminent trade association, the NVCA serves as the definitive resource for venture capital data and unites its member firms through a full range of professional services. For more information about the NVCA, please visit