Supporting the VC industry – a letter to my Sentors and Congresswoman
Dear Senator Udall, Senator Bennet, Congresswoman DeGette:
There is threat to my livelihood as a high tech entrepreneur in Colorado. Risk capital — the life blood of small companies so vital to Colorado’s economy — is facing onerous and unproductive regulation from the Treasury Department.
I recognize that Washington’s tendency is to over-regulate in the aftermath of crises. The passage of Sarbanes-Oxley in the wake of the Enron and Worldcom debacles is a good example. (“SOX” adds roughly $1M / year in compliance costs to small publicly traded companies. This unintended consequence has negatively impacted the ability of high tech startups to go public to provide liquidity for patient investors and hard working employees.)
Treasury’s current mood seems to paint all “alternative asset” investors with the same brush. Venture capitalists don’t invest in derivatives, credit default swaps, or other exotic instruments that contributed to last fall’s economic disaster.
VCs make bets on small teams and innovative technologies. These investments are notoriously difficult to value. (What is a business idea and three dedicated, smart co-founders worth?)
VCs have to work very had to earn a return for their limited partners. Those good enough to attract repeated investments in their funds from sophisticated limited partners need our government’s support.
Please join me in my opposition to regulating a sector of the economy that (1) had nothing to do with Wall Street’s collapse, and (2) provides the fuel for our country’s innovators.
Two links for you to consider:
http://dealbook.blogs.nytimes.com/2009/08/10/new-rules-threaten-risk-taking-when-most-needed/
http://online.wsj.com/article/SB10001424052970204251404574340320972179270.html
Best,
Adam S. Rentschler
