We’ve got a new President and a new Congress. We’ve also got 5 Questions for Mark Heesen, head of of the National Venture Capital Association.
1. What is the NVCA’s top legislative priority for this session?
First of all you have to look at the stimulus package. I think Obama understands very clearly the importance of cleantech and the importance of technology in general. Infrastructure is not just bridges and roads, but it’s also things like a new energy grid and greater broadband access.
So, at the end of the day, what we want is to make sure those words during the campaign and inaugural address become legislative language. It’s a short-term priority, but also a top priority.
2. What is your general viewpoint toward what the federal government has done over the past few months, vis-à-vis the economy?
We look at it from an entrepreneur’s viewpoint. After the bubble burst in 2000, Silicon Valley and its companies didn’t run to the government to bail them out. Entrepreneurial companies that fail, fail. So that’s our basic instinct.
But I think that’s been tempered by the fact of a worldwide economic slump. And government is an integral part of venture capital, because we don’t do the basic R&D. They’ve done it for many years, and the only others who’ve done it are large corporate labs like Bell Labs, that don’t do it any more, by and large.
It’s also the case that we didn’t have much competition when we built the biotech and IT sectors. But that’s not the case in the energy sector. There are large established players that have tremendous sway in Congress, like big oil and gas and public utility commissions. That means the young companies need some sort of subsidization to grow and compete with these huge entities that have build-in advantages.
3. Last April, you I heard you tell a crowd in North Carolina that they VC industry needs a viable IPO market to prosper. If so, what would it take to get IPOs to come back? Is it simply a case of amending Sarbanes-Oxley?
I’ve never said that SOX isn’t the reason companies aren’t going public, because it’s always been bigger than that. You’ve got huge obstacles like the lack of research coverage, but the reason companies don’t go public right now is that you don’t have public market investors willing to buy emerging growth companies.
Today we’ve seen a perfect storm of investors sitting on the sidelines, and regulation that’s been made for one size fits all. So the question is what can we do as an industry, and what can the government do? We’re working on this right now, and will be putting out proposals next month on the whole capital markets process.
One thing for sure is that the SEC, instead of going out and regulating right away, should look at what its done over the last ten years, and see what impact those decisions have had on emerging growth companies. Before mucking up in new areas, check to see if one size really will fit all. We’ll posit that it doesn’t, and that there need to be some changes. But, again, you won’t see an IPO market until you see investors and you won’t see them until you see a stable stock market. Frankly, I don’t know when that will be.
4. One of your big issues over the past two years has been tax treatment of carried interest. Is that still a big priority?
I think it continues to be an issue, but you were dead wrong when, the day after the election, you basically said that a change to the carried interest tax was fait accompli. We got lots of calls after that column, saying “Oh my god.”
We knew it wasn’t going to happen at that point. You’ll see it brought up again, but in this environment it’s very unlikely you’ll see Congress working on issues that are not huge revenue-raisers. They will not be out there trying to slap the wrists of people they shouldn’t be slapping the wrists of, because there are more important issues to work on at this point.
5. What is the NVCA’s relationship with the Private Equity Council (PEC) and the Institutional Limited Partner Association (ILPA).
PEC continues to do their work, and I’ve seen some of their research and other things they’ve put out. I don’t know what they reputation is on Capitol Hill, so I think the jury is still out… We’ve dealt with ILPA, but they’ve made a point not to be terribly active on policy issues.