Category: Public Policy

NVCA National Security Campaign 



NVCA National Security Campaign


At NVCA, we have convened VCs and climate-focused entrepreneurs from across the country to discuss an innovative policy agenda that will focus the power of the U.S. startup ecosystem on climate technologies. Effective partnerships between the public and private sectors create space for cutting edge ideas to challenge traditional business models and approaches. This forged alliance will be integral in unlocking the full potential of startup innovation in the energy transition.

The nation’s startup ecosystem is advancing breakthrough climate technology innovations in areas such as new energy sources and storage, transportation and mobility, carbon capture and utilization, agriculture and sustainability, water and recycling, and manufacturing.

In 2021, 887 U.S.-based climate tech startups raised $27.55 billion in VC funding, more than double 2020’s record of $12.7 billion invested. Given the importance of speed in getting the economy to carbon-neutrality, this wave of young companies will play a fundamental role in advancing the country’s effort to address the climate crisis.

In honor of Earth Day, we’re recognizing and celebrating five leading VCs in climate and sustainability investing within the NVCA member community. We’re excited to hear from them, highlight their impact, and cheer their continued success!

Nick Beim, Partner, Venrock 


As a Partner at Venrock, Nick focuses primarily on artificial intelligence, software, fintech, and defense investments. He likes to invest early in companies with significant disruptive potential and help them develop their products and business strategies. When he is (Read more...)

Venture Industry’s 2022 Policy Priorities



In 2021, NVCA successfully navigated significant policy challenges and opportunities for the venture capital industry. Our activity was driven by two main factors. On the one hand, there is new excitement around the promise of the startup ecosystem and its ability to solve key problems. Many policymakers understand how venture-backed companies are addressing the ongoing pandemic, climate change, deep tech, and other issues. On the other hand, the startup ecosystem is often misunderstood or forgotten and becomes collateral damage as policymakers address another ill in the marketplace.

In 2022, many of the policy debates of last year will continue. But one lesson is clear: there are “known unknowns” – policy issues will come out of left field, and we will be prepared to defend the industry. Let’s look ahead at what this year will bring.

Build Back Better Act

Last year, NVCA spent significant time and resources on the Build Back Better Act. As the year closed, the legislation fortunately did not increase taxes on carried interest or the top line capital gains rate, but did include misguided changes to Qualified Small Business Stock (QSBS). We raised concerns to key lawmakers regarding the proposed QSBS changes, which are detailed in a coalition letter NVCA joined with 31 innovation and entrepreneurship organizations.

The path forward on Build Back Better is unclear in 2022. Negotiations appear to be on pause between the main actors – Senators Sinema and Manchin on one side and the White House and congressional leadership on the (Read more...)

Startups Will Be Collateral Damage in Lawmakers’ Zeal to Attack Big Tech



Congress has trained its sights on Big Tech: several antitrust bills have been introduced. But one bill stands apart because it would affect more than large tech companies – it harms American entrepreneurs who launch new enterprises and are responsible for our economic dynamism. Policymakers must take care to protect the startup model that has made the United States the envy of the world.

The Platform Competition and Opportunity Act, sponsored by Senators Amy Klobuchar (D-MN) and Tom Cotton (A-AR), imposes an effective ban on acquisitions of other companies by Apple, Amazon, Facebook, Google, and arguably Microsoft as well. Senators Klobuchar and Cotton have charted this course because they believe large tech companies have been scooping up would-be rivals before they grow to be competitive threats.

As solutions go, the Platform Competition and Opportunity Act is like using a bazooka to kill a fly. Sure, you’ll kill the fly; you will also destroy your house.

Big Tech critics often cite Facebook’s purchases of Instagram and WhatsApp as prominent examples of what needs to be prevented in the future. But these acquisitions are extreme exceptions to the rule and should not drive policymaking. Policymakers should consider the market and the significant benefits that acquisitions provide.

In listening to critics, you might think each acquisition was a Machiavellian effort to crush a potential competitor. Instead, we see large tech companies make acquisitions to help the underlying company run faster and jump higher. In the last few years, Big Tech has acquired VC-backed (Read more...)

How Policymakers Can Capitalize on Two Geographical Trends in the Startup Ecosystem



Venture capital has left a massive imprint on American life, having served as fuel to create new industries (like biotechnology) and new companies (like Moderna) that have transformed the world. A recent academic study found that VC-backed companies are almost solely responsible for corporate innovation, and venture-backed public companies perform nearly half of total U.S. R&D spending across government, academia, and industry.

The United States needs more of this activity to address challenges like climate change, cybersecurity, and healthcare. The future of American innovation will be determined by how well two geographic trends—one an opportunity and the other a challenge—are navigated by American policymakers and the venture industry. The opportunity before us is that venture and startup activity is spreading into new pockets of the United States—the “Rise of the Rest” talked about by AOL founder Steve Case is accelerating. The challenge we face is that venture and startup activity is increasing overseas, and our share of global venture investment is diminishing.

Geographical trend #1: venture spreads across the U.S.

Our country is blessed to have startup epicenters like Silicon Valley, the greater Boston area, and New York City where venture capitalists deploy billions of dollars annually in new companies. But entrepreneurs are everywhere, and they need capital to grow their businesses.

In the past decade, vibrant venture and startup ecosystems have emerged across the country that are now supporting local entrepreneurs. NVCA has created a “Spotlight On” series to highlight these exciting startup movements and to date has (Read more...)

PRESIDENT BIDEN SHOULD HIGHLIGHT AMERICAN LEADERSHIP IN CLIMATE TECHNOLOGY INNOVATION AT COP26



As President Biden and his team prepare for the COP26 UN Climate Conference next week, they should highlight to the world how America is providing leadership in climate-focused venture capital (VC) investment.  VC investment is the central factor accelerating the pace of innovation across a range of leading technologies, including biotechnology, medical devices, computer software and hardware, and climate and sustainability.

Simply put, innovation must drive down the cost and improve the reliability of climate technologies enough to make the global energy transition economically viable in developed and developing countries.  Most importantly, this must happen before the most consequential impacts of climate change become unavoidable.  Fortunately, American startups are leading the world in climate and sustainability technology investment, raising record amounts of capital to a develop broad range of climate and sustainability technologies, a promising trend that we must build off in order to be successful.

Data collected by Pitchbook shows that America is the undisputed leader in both the number of companies and amount of capital invested in climate technology startups within its borders.

Over the past five years (2016-2020), 44.5 percent of global climate technology VC investment went to U.S.-based startups.  1,917 early and growth stage companies raised $41.8 billion to develop solutions to the climate crisis, including new energy sources; energy storage; food and agriculture; clean transportation and infrastructure; and carbon capture and utilization technologies.  China has attracted the second most VC investment for climate technologies, totaling $32.8 billion invested into 363 companies.  Total VC investment in (Read more...)

Study Shows Significant New Taxes on Carried Interest Damages Economic Opportunity



New research reveals that taxing carried interest at ordinary income rates will harm new venture capital (VC) fund formation in emerging technology regions in the United States. The study, by Professors Yael Hochberg and John Barrios (of Rice University and Washington University in St. Louis, respectively), finds that taxing carried interest as ordinary income would make starting a new fund less economical and instead make steady employment at incumbent companies by comparison far more attractive than forming or participating in venture capital.

In particular, the lower potential earnings due to additional tax burdens could significantly reduce the number of VC funds in areas with less mature startup ecosystems, reduce diversity in the startup ecosystem, and limit the effectiveness of several programs in the Build Back Better agenda. The success of several significant priorities under consideration by policymakers today—such as the U.S. Innovation and Competition Act, the Infrastructure and Jobs Act, and the Democratic reconciliation bill—rely to great extent on the availability of funding to support the creation and growth of new innovative entrepreneurial ventures.

Study Highlights:

  • Carried interest tax changes “have the potential to have far-reaching effects on the creation and growth of innovation-driven entrepreneurial ventures in precisely the locations where policymakers are often seeking to increase entrepreneurial activity and growth.”
  • VCs under a tax regime taxing carried interest at ordinary income rates face a wage equivalent approximately 20-25% lower than under the current tax regime, a substantial income hit.
  • Over the life span of a (Read more...)

Former Fed Vice Chair and VCs agree on Carried Interest



The Wall Street Journal opinion commentary “House Democrats Miss Some Necessary Tax Increase” published on Sunday made a great point about what helps drive investment in American made innovation.

The author, Professor Alan Blinder discussed the tax treatment of carried interest for general partners of private equity funds (PE).  For those not versed in the world of investment partnerships, carried interest is simply a euphemism for the profits that general partners (GPs) receive if (and only if) the partnership is successful. Professor Blinder describes a common structure used by PE and venture capital (VC) funds where 2% of the capital in the fund is used to pay for fund operations, including salaries of general partners, and (if the partnership is successful) 20% of the profits are allocated to general partners.

Professor Blinder was incorrect in stating that the 2% management fee was “carried interest,” it’s actually the 20% profit share. But importantly, he also said, “Forget the 20%; that is capitalism.”  On this point, we could not agree more. The fact is, carried interest is capital gains.

While carried interest has become politicized, with many in the political world espousing views on the issue while not actually taking the time to understand it, the reality is it is the primary economic incentive for participation in venture capital.

VC partnerships finance the growth of technology startups, providing funding from the concept stage through an initial public offering, acquisition, or bankruptcy. These funds are critical to President Biden’s Build Back Better (Read more...)

Technology Plays Big Part in Bipartisan Infrastructure Framework



The House is expected to vote on the bipartisan infrastructure package this week. When you think of infrastructure you don’t normally think about technology, but this bill is more than just roads and bridges. It is squarely focused on modernizing our infrastructure through integration of frontier technology. The legislation includes dozens of programs that seek to incorporate technology into a range of infrastructure-related systems, processes, and facilities, and reshore advanced technology manufacturing. It shows a clear intent by Congress to accelerate American economic growth and opportunity by harnessing the power of innovation to address significant societal issues.

Below is an overview of technology’s role in the bipartisan infrastructure framework. If successful, the bill could generate both a greater supply of new technologies that address various societal priorities and more significant demand for those technologies from government and other public service entities.

We will work through the process to identify and target any issues that may unintentionally exclude startups and growth companies. Should this bill pass into law, various federal agencies will be responsible for implementation, including writing the rules that will stand up the programs. To achieve the objectives of the legislation, program rules and procurement processes must emphasize the most promising and best technologies. They must be clear and timely to fit with commercial practices and provide a level playing field for technologies developed with equity financing.

The bipartisan group of policymakers who passed this bill should be applauded for their efforts and vision of a modernized American infrastructure (Read more...)

VC-backed Cyber Companies Need a Federal Government Partner to Win the Cyber Security War



Recently, President Biden hosted a cybersecurity summit with corporate executives and stakeholders to discuss threats and how the public and private sectors can work together to address the issue. The president’s attention to cybersecurity is encouraging as leadership on this issue is critically needed. Cyber-attacks seem to be in the news every week – be they ransomware attacks, data manipulation, or other threats from bad actors.

The attendees at the White House meeting were generally large companies, like Alphabet, Amazon, JP Morgan, and Southern Company. Two venture capital-backed companies were also there: Coalition, which raised capital from Felicis Ventures and offers a cybersecurity platform and cyber insurance, and Resilience, which empowers the insurance ecosystem and is backed by Lightspeed Venture Partners and CRV. The participation of Coalition and Resilience is a promising sign that the Biden Administration sees venture-backed companies as a necessary ingredient in safeguarding against cyber threats.

More engagement is needed with innovative young companies

To tackle cybersecurity, the Biden Administration should redouble engagement with the entrepreneurial ecosystem, which produces the most innovative companies in the world.

Why include new companies alongside established ones? Take the U.S. government’s successful bid for a COVID-19 vaccine, which led to Moderna and Pfizer developing deployed vaccines. Moderna was just 10 years old when Americans began receiving the company’s vaccine, whereas Pfizer was 171 years old. Despite their age differences, both offered invaluable innovation that has saved lives.

In the same way, cybersecurity startups contribute to defense of our (Read more...)

VC Policy Pulse: Startup Visa with Scott Raney & Sophie Alcorn



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 Scott Raney, Managing Director at Redpoint, and Sophie Alcorn, Founding Attorney of Alcorn Immigration Law, about a Startup Visa category for immigrant entrepreneurs who want to come to the U.S. to create a new company. 

Background

NVCA has long supported the creation of a Startup Visa that offers a separate visa category for immigrant entrepreneurs who create a new business, are backed by venture capitalists or other investors, and create American jobs. A Startup Visa is a common-sense way to grow the American economy through new company formation by immigrant entrepreneurs. Far from taking the job of an American, an immigrant entrepreneur can only qualify for the Startup Visa when he or she has created jobs for Americans and has been backed by investors with a track record of success.

While the U.S. has failed to pass a Startup Visa into law, more than 20 other countries—including Canada, the U.K., France, Spain, Japan, Hong Kong, Australia, and Singapore—have put into place a Startup Visa or a similar structure. This puts the U.S. at a competitive disadvantage in the competition for global entrepreneurial talent.

On July 26, Representative Zoe Lofgren (D-CA) introduced the Let Immigrants Kickstart Employment (LIKE) Act of 2021. NVCA strongly supports the LIKE Act. Rep. Lofgren’s bill creates both a nonimmigrant and immigrant (Read more...)