The DEAL Act Increases Access to Capital for Emerging Fund Managers and Early-Stage Startups to Help Rebuild the Economy
FOR IMMEDIATE RELEASE
June 29, 2021
Contact: Sabrina Fang
WASHINGTON, DC – The National Venture Capital Association (NVCA) advocated for improving returns and capital formation in the initial stages of the startup ecosystem which is the focus of the Developing and Empowering our Aspiring Leaders (DEAL) Act, reintroduced today by Representative Trey Hollingsworth (R-IN). The bill will allow venture capital funds to acquire more shares from founders, angel, and seed stage investors. These early-stage investors will then be able to recycle their gains into the next generation companies. The DEAL Act would also make additional capital available to emerging and under-represented fund managers, and the “seed” companies they invest in.
“Improving capital formation for U.S. startups across the country will help build new high growth companies that will generate new high paying American jobs and increase competition in the economy,” said Bobby Franklin, President and CEO of NVCA. “As our country continues to recover from the pandemic, this bill will support the next generation of entrepreneurs and fund managers who are leading our economic resurgence.”
NVCA is grateful for Congressman Hollingsworth’s strong leadership and his efforts to support the environment for patient capital investment and long-term company growth.
Currently, VCs must register with the SEC as an Exempt Reporting Advisor and ensure that more than 80 percent of their activities are in qualifying investments, defined as direct investments into private companies. Otherwise, they must become Registered Investment Advisors (RIAs), a designation that was only meant for private equity and hedge funds, adding costs and complexities for VC firms. As companies have stayed private longer, secondary investments have become more prominent in VC financing rounds. These investments are a significant source of liquidity for founders and early-stage investors who can then recycle the capital into a new round of nascent companies. In addition, VC investments into other VC funds are not considered qualifying investments. “Fund of funds” investments from established VC funds seed emerging managers and encourage greater distribution of venture capital activity.
About National Venture Capital Association
The National Venture Capital Association (NVCA) empowers the next generation of American companies that will fuel the economy of tomorrow. As the voice of the U.S. venture capital and startup community, NVCA advocates for public policy that supports the American entrepreneurial ecosystem. Serving the venture community as the preeminent trade association, NVCA arms the venture community for success, serving as the leading resource for venture capital data, practical education, peer-led initiatives, and networking. For more information about NVCA, please visit www.nvca.org.