Yesterday, the U.S. Securities and Exchange Commission made public its definition of venture capital firms for the purposes of exemption from SEC registration requirements.
VCs and the NVCA hoped, with bated breath, that few if any VC firms would get sucked into the same category as private equity and hedge funds. But even exempt firms face some filing requirements and could be subject to SEC examinations under a separate SEC rulemaking. (Austin Ventures recently hired a combination compliance officer and general counsel, raising questions about the extent of such requirements. In addition, speculation has emerged regarding whether Austin Ventures could be re-classified.)
Yesterday’s announcement could have substantial reverberations throughout the venture investing world. But VCs aren’t getting caught off-guard. This February, speaking before a Philadelphia audience, Union Square Ventures’s Fred Wilson told conference-goers that USV would structure its funds in any way necessary to avoid being heavily regulated. Now, the question is, will he and USV have to do that?
Since the decision has been publicized, we are weighing in with analysis. But, VCs, once again, we’re counting on you to fill in the blanks here. How would the re-classification of your fund impact your business? Do you expect the S.E.C.’s definition will impact you at all? Will having to disclose confidential information jeopardize investments and portfolio strategy? Or will it only touch on the biggest VC firms in the U.S.? And, if that is the case—will this represent a leveling of the playing field for smaller venture capital firms? And, perhaps most important—will you fight the definition? Comment below!!
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