Contact Information: Contact: Emily Mendell NVCA 610-565-3904
NVCA Chairman Terry McGuire Testifies Before House Financial Services Committee in Support of Private Fund Investment Advisers Registration Draft
| Source: National Venture Capital Association
WASHINGTON, DC--(Marketwire - October 6, 2009) - National Venture Capital Association (NVCA)
Chairman and Co-Founder of Polaris Venture Partners, Terry McGuire, today
testified before the House of Representatives Financial Services Committee
in support of the Private Fund Investment Advisers Registration draft which
exempts venture capital funds from mandatory registration with the
Securities and Exchange Commission (SEC). The draft legislation seeks to
achieve greater transparency into financial systemic risk and eliminate
regulatory gaps in wake of the financial crisis that has taken place in the
last year. It has been the NVCA's position that the venture capital
industry does not pose systemic financial risk and that requiring firms to
register would place an undue burden on the venture industry.
"The legislative draft recognizes the important difference between
entrepreneurial risk in which venture capitalists engage and financial
systemic risk in which we do not," said McGuire. "Our investment model is
simple. We invest in start-up companies run by entrepreneurs using capital
from ourselves and outside investors. We invest cash to purchase equity
and hold that equity, working side by side with the management for 5-10
years until the company is sold, goes public, or fails. In the latter
case, there is no multiplier impact on losses. While we lose our capital,
there are no derivative transactions or leverage that would lead to a
ripple effect."
Mr. McGuire asserted that the venture capital industry understands the need
for increased transparency into the industry's activities and offered to
explore an enhancement to Form D, the document that is filed with the SEC
when a venture capital firm raises a fund. Per McGuire, an enhanced Form
D, which he referred to as Form D-2, would be completed by venture capital
firms annually and would pose questions on systemic risk factors such as
leverage, trading positions and counterparty obligations.
Said McGuire, "The D-2 solution could be a viable option because it does
not require a lengthy regulatory process to test a definition of venture
capital. It would cause venture firms to annually confirm that they are
'safe from systemic risk' by responding to questions that reveal the nature
of their investing activity."
Mr. McGuire expressed the industry's appreciation for the Committee's work
in drafting legislation that recognizes the role of venture capital in the
U.S. financial system.
"We applaud the Committee's intent to protect entrepreneurial growth and
innovation," he concluded. "We stand ready to work with you so that you
can gain the transparency you require without hurting our industry and the
start-up companies we support."
For a full copy of Terry McGuire's written and oral testimony, please visit
www.nvca.org.
The National Venture Capital Association (NVCA) represents more than 400
venture capital firms in the United States. NVCA's mission is to foster
greater understanding of the importance of venture capital to the U.S.
economy and support entrepreneurial activity and innovation. According to
a 2009 Global Insight study, venture-backed companies accounted for 12.1
million jobs and $2.9 trillion in revenue in the United States in 2008. The
NVCA represents the public policy interests of the venture capital
community, strives to maintain high professional standards, provides
reliable industry data, sponsors professional development, and facilitates
interaction among its members. For more information about the NVCA, please
visit www.nvca.org.