President Barack Obama today proposed wide ranging financial regulations that could touch the venture capital industry, possibly requiring investors in early-stage companies to register with the Securities and Exchange Commission. Some venture capitalists I've spoken to don't like the idea of being lumped together with hedge funds and private equity shops, which they view as more aggressive investors rather than true company builders.
The National Venture Capital Association issued a statement in opposition to Obama's proposal, essentially saying that venture capitalists should be left alone. Full statement below:
"The National Venture Capital Association understands the need for these important reforms for investment managers that could pose significant systemic risk to the stability of our financial system.
However, we strongly assert that the venture capital industry does not pose such risks and therefore should not be swept into regulation intended for other investment vehicles.
The venture capital industry operates in the private market, building companies. It does not utilize leverage on a significant scale nor does it trade stocks or derivatives in the financial markets.
Investors in venture capital do not rely on their invested funds for short term liquidity. Lastly, the size of the entire venture capital industry is relatively inconsequential when compared to other asset classes being considered for regulation.
For these reasons, we believe that the entrepreneurial risk associated with the venture capital industry is not relevant to the systemic risks which the Administration is hoping to mitigate with this reform. In fact, maintaining an environment that supports entrepreneurial risk is critical to economic growth for the nation as a whole.
Although critical details such as the threshold level for registration are still emerging, sweeping venture capital into this proposed plan, could place an undue burden on smaller venture firms which should be directing their resources towards identifying and building new companies and growing jobs.
The current regulatory disclosure requirements are sufficient and have worked effectively for decades. We look forward to working with Members of Congress and the Administration on preserving an appropriate environment for venture activity as this process moves forward."
[Flickr photo via transplanted mountainieer]
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