What the facts are not: VC's want a bailout?

Sometimes, rarely, one has to dispense with the pleasantries that keep us all feeling like we are polite ladies and gentlemen.  Anne Field's blog post above is such a total crock that it deserves such a response.

Nowhere, I repeat nowhere, has there been any plea from any responsible or representative member of the venture capital community looking for a bailout from the US government.  The fact that the NVCA periodically does a study to assess the positive impact of venture capital investments on the economy does not mean we, as an industry, have our collective hands out.  It means that the NVCA, as our primary voice in Washington, wants to make sure the government doesn't forget what we do, and why it matters, and in one of their fits of "fixing" something have them inadvertently hurt what already works.

A good example of that is the current move to lash together hedge funds (which are not capital creators, nor job creators, but simply financial engineers) and venture funds into the same bucket and then regulate us as one.  That may well stop the abuses of the hedge funds that assisted in our current financial difficulties, but it will also do direct damage to the venture capital industry. 

A similar move is about suddenly taxing carried interest as ordinary income.  Last time I looked, if you invest in an asset (our carried interest in our funds, which we contribute cash to own) and that capital is at risk of loss and is illiquid for period of years (see: VC bubble-era funds for a real-life example), then any returns on that asset are taxed as capital gains or losses.  The fact that some in the private equity world don't actually have their personal capital at risk for long periods does not seem to faze those in Washington would change the rules and make what has always been a capital gain in venture capital an ordinary gain, just for this special case.

So, if maintaining what has been the status quo over the last 30+ years is Anne Field's definition of "looking for a bailout" to her maybe this isn't a crock.  But it sure is to anyone with common sense, and sense of history.

Final crock-pot shot:  Ms. Field's piece points out that a majority of successful startups took no venture capital.  True.  But then she surmises that therefore venture capital is an industry than can be killed off with no material consequences (note:  I did not say, "should be bailed out").  So, if she really thinks that we as a nation would be better off without the likes of Microsoft, Intel, Apple, Cisco, Google, Amazon, Amgen.....and the long list of world-leading, world-class examples of innovative, job creating, profit making, taxpaying engines fueled by venture capital, I guess that would be one opinion.  

My opinion?  That's Bull%$#@!

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