While the investment industry as a whole is still hoping to sideline
efforts to reclassify the way that management fees and carried interest are treated under the tax laws, and private equity firms and hedge funds are massively stepping up their
efforts to influence legislation, venture capitalists are still holding on to what they believe is a historic record of defending their position. VCs certainly aren't in a position to throw their bigger-money peers under the bus to save themselves just yet, but National Venture Capital Association president Mark Heesen clearly believes its members must highlight a unique role in the finance industry.
Speaking to entrepreneurs and venture capitalists at the Venture Northwest 2007 conference on Nov. 2 in Portland, Ore., Heesen called the next few weeks crucial in the tax battle, particularly as Congress addresses a patch for the Alternative Minimum Tax. But while the overall investment industry is largely presenting a unified front in holding up investment returns as such an important engine of growth in the economy that they should not be messed with, Heesen urged Congress to "look at each industry individually."
While PE firms and hedgies are relative newcomers to seeking influence on Capitol Hill, venture capitalists argue that the industry, alongside trade associations including the American Electronics Association, has been active since the 1970s in pointing out the outsized societal returns that technology companies create on relatively paltry investment dollars.
Calling venture capital investment "barely a rounding error," at 0.2% of all financing, Heesen dutifully trotted out the latest figures, demonstrating that in 2006 venture capital-backed companies produced 10.4 million, or one out of every 10, jobs in the U.S. and had $2.3 trillion in sales, representing 17.6% of the GDP.
Heesen highlighted the cyclical nature of the venture industry as well, distinguishing it from other investments that come and go as asset classes and further distancing it from the high-flying buyout firms and hedge funds that have brought so much attention to the tax issue.
- Clifford Carlsen See Nov. 2 story from The DealSee July 20 story from The Deal
Continue reading below
