Mark Heesen, who leads the venture industry's main lobbying group, said today that there have been pluses and minuses about President Obama's approach to regulation and taxes. Heesen said the federal government is considering some anti-venture legislation, but he sounded pretty confident that most of it won't get passed.
Heesen is president of the National Venture Capital Association, and he made today's remarks on-stage at the group's annual meeting. The good thing about Obama is that "this is a president and an administration that understands technology," he said. The downside, however, is that Obama's adminsitration took on too much, too quickly.
"I think they're suffering the backlash from that right now," Heesen said.
Perhaps the biggest issue for venture capitalists is a proposal to reclassify carried interest, the money that partners earn on investment profits, from capital gains to regular income. That would dramatically increase taxes for VCs. This is a recurring issue that we've covered in the past, and one that was previously defeated, but it's being considered again as a way to help pay for health care reform. The problem, Heesen said, is that the government is rapidly running out of ways to generate new revenue, so carried interest is "the lowest-hanging fruit right now."
The NVCA continues to campaign against these changes. It plans to run advertising on political website Politico emphasizing venture capital's importance to job creation, and has also launched a Web page where VCs and others can register their opposition to the proposal.
Heesen also discussed the proposed financial reform legislation that includes new restrictions on angel investing. The NVCA and the Angel Capital Association have explained their objections to Senator Chris Dodd, who authored the bill, and Heesen said the senator understands that he was "not working on the side of the angels." Those restrictions will be changed into something more favorable, Heesen said.
Beyond government policy, Heesen also commented on broader changes to the venture industry. It has almost become a cliche that the venture capital industry is shrinking, but Heesen said that doesn't mean that most firms will disappear. If you look at the past year or so, firms that previously raised $300 million funds are now raising funds of $100 million or $150 million, he said.
"Those firms are going to stay, but instead of having three partners they're going to have two partners," Heesen said.