Michael Brown, a longtime general partner with Battery Ventures, three years after joining its board of directors, was elected to the role of President of the National Venture Capital Association. Earlier this week, we caught up with Brown to ask about his new, year-long role with the 48-year-old business group — and what issues he now sees as top of mind for many American VCs. Yes, he is representing now.
TC: VCs have always been concerned about tax treatment, but they’re apparently even more mindful, given Joe Biden’s proposal last month to raise the top rate on long-term capital gains from 20% to 39.6%. I went. What do you think about that offer?
MB: So you’ll hit me straight in the face with a two-by-four on the taxes in the first question, I love it.
This is the position of the NVCA, this is my personal position and if you ask most venture capitalists, this position is held very broadly: What is Biden trying to do with it? plan better . . . We fully support this and we in Congress are working actively with both the administration and policymakers to do much of what they want to do. what he is talking about – whether it is physical infrastructure, such as bridges, roads, aircraft; or digital infrastructure, which means Internet broadband access more broadly and cyber security; or climate infrastructure, [around] How do we transition the economy and the country to a greener carbon-neutral or even carbon-negative world – all of those things need venture capital to fund entrepreneurs. . . It’s actually almost at hand. He wants it to happen, we want it to happen, and we can help facilitate it [because] It’s not going to come from Corporate America, we know that.
TC: To your point, the money has to come from somewhere. Is there a number you would be more comfortable with?
MB: I do not wish to speak on behalf of NVCA as to what our target rate is. I’d say Congress and other key people talk about a revenue-maximizing rate, and about 25% to 28%. . . And I think it’s kind of where people think it’s appropriate to go. We recognize that long-term investments should be rewarded and not discouraged through a tax structure.
What happened under the Trump administration, where they extended the deadline three years [from one year] We were fine with it before you could get the long term capital gains treatment because we have been investing for over three years and I think there is some time component to deciding what is long term and what is too much. doesn’t work well.
TC: Another topic that comes up frequently is the IPO market. It sure seems healthy right now. Would you have any suggestions regarding taking companies public for the current administration?
MB: We’re obviously very supportive of capital markets. That being said, if you look at the number of public companies today versus the number of public companies 20 years ago — and that’s not just true for technology companies — that’s about half the number. We think it’s a function of a few things. One is how the capital market functions today – the ability to obtain research, etcetera, which has led to [specific] Legislation; regulatory issues; And just the burden of a public company versus a private company. you have other [rules] Those that have passed over the years affect access to the capital market for private companies, and that’s why you’re seeing companies raise more money and stay private for longer, which benefits everyone. is not for.
TC: What improvement would you put the most immediate emphasis on here?
MB: Now going back in a way, in 2012, there was a piece of legislation called the JOBS Act that helped open up the public markets by addressing some of the risks and costs associated with public markets and regulatory burdens. It needs to be updated. It’s something in particular that if we can modify it and make it current, it will help to ramp up access for smaller companies to the public markets quickly and quickly.
TC: What do you think about SPAC taking these special purpose takeover companies to the public for companies that include their own earlier investors in those companies?
MB: It’s good for companies to have more options and more ways to access capital markets. That being said, those vehicles need to be regulated appropriately, and SPAC is one area where regulation hasn’t kept up with the realities on the ground. I think even before Chairman Gensler and in previous administrations, [the agency] It was also felt that there was a need for better control over the stock market.
One of the benefits of SPAC is its ability to provide further guidance. You can’t even have an IPO or an outright listing and I wouldn’t be surprised if the SEC comes out with revised guidance and/or outright restrictions on the ability to provide further guidance. There’s probably something that needs to be done there, but we’ll see.
As far as conflicts of interest related to economics, which focuses on getting investors to buy companies in their portfolios, I don’t know whether there will be regulatory measures to address conflicts. The SEC has the ability to review any of the [deals] If they want to, but in the meantime, we are seeing the market actually changing economic terms. You are seeing reduced promotions by SPAC sponsors. You are looking at reduced warrant coverage or even the elimination of warrant coverage. You have some SPACs that look like venture funds, where there’s really no promotion, but rather a breakthrough fee if the SPAC completes the merger and does well. You’re also looking at the sponsor’s interest over time, so they’re locked into a longer horizon. The market itself is making a lot of sense.
TC: NVCA has long been pro-immigration. What are some of your proposals on this front? What changes or installs would you like to see?
MB: We took a very aggressive approach in the previous administration International Entrepreneurial Rules and also [successfully] sued Trump administration to enforce them, or at least enact a rule that enables entrepreneurs to come to the US as long as they have a minimum number of dollars in financing to build their business.
Look, we are in a competitive market. If you look at venture capital 15 or 20 years ago, 85% of the dollars invested went to companies in the United States, and a lot of that went to companies founded by immigrant entrepreneurs. Today, that number is just over 50%. [including because] Founders who are coming here and getting educated and going back home and setting up a company.
We want founders to start their companies here and grow their companies here to create jobs and spread wealth. The International Entrepreneur Rule eventually came to be called the Startup Visa, an official visa status that enables entrepreneurs to come and ensure they can live in the United States and start and build a company. It’s something that’s been in the works for a long time, and we’re hoping that Zoe Lofgren, a female member of Congress from California’s 19th District Introduce this visa bill again soon, so that we can have this as part of the Build Back Better plan, because we need immigrant entrepreneurs to come here and start companies and employ the wider American population.
If you think about the technologies that we used to get through COVID, it was Zoom, it was Modern, it was even Pfizer, which was 100 years old. All three were founded by immigrant entrepreneurs who came to the United States to start their own businesses.
TC: Is this a role you’ve volunteered to do? Is there a hot potato game between NVCA’s board of directors every year?
MB: [Laughs.] It’s not just a hot potato that’s passed up. [NVCA president and CEO] Bobby Franklin and the outgoing chairman discuss who they like based on attending board meetings and how one is involved with what NVCA is doing in Washington and who is the best part of the industry and entrepreneurial ecosystem. Can be a good lawyer.
I think this is a great time to do this; Intellectually, it’s going to be extremely interesting, and that’s very important for the industry. [because] These are big policy initiatives and we are a very important part of the solution here, and it needs to be well known and well understood by the Administration and Congress. This is our mission.