Venture Capital Regulation
By admin ~ May 23rd, 2010 @ 10:57 pm
Update on Venture Capital Regulation
Regulation
Venture capital is seen as somewhat less vulnerable to American financial regulation, compared to buyout firms and hedge funds. This is for multiple reasons:
- Buyout shops and hedge funds are thought to pose a greater systemic threat. Buyout firms perhaps less so, but because they manage such large amounts of assets regulators are inclined to reign them in along with hedge funds.
- Venture capital firms are more linked to small businesses and providing growth capital to budding firms. At a time when unemployment is still very high, no politician wants to come out looking opposed to business.
- Lastly, venture capitals are typically smaller than buyout firms and hedge funds and therefore less capable of paying increased taxes. Indeed, four Democratic senators and one Republican have proposed a waiver to the tax hike on carried interest–where VC’s get a lot of their profits.
I would not be surprised if these arguments will be successfully used to fend off regulation and tax increases on venture capital.
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