NVCA’s VenturePAC Hedges Political Bets

Private equity and politics regular overlap.

For instance, onetime investors Mitt Romney and Mark Warner hold elective office as the governors of Massachusetts and Virginia, respectively. Meanwhile, former baby-kissers Bill Clinton, John Major and Rudy Giuliani are now affiliated with private equity firms. Pres. Bush and Sen. John Kerry feature VCs as chairman of their California campaign finance committees while former U.S. Navy Secretary John Lehman currently splits his time between the 9/11 Commission and his managing principal role with private equity firm J.F. Lehman & Co.

And then there are investors who double as Defense Department advisors – like Richard Perle and Jim Woolsey.

Not only do VCs contribute to various campaigns and causes, but industry mouthpiece the National Venture Capital Association also operates a political action committee named VenturePAC.

The group has disbursed more than $2.6 million since the beginning of 1999, including $117,000 during the first quarter of 2004. The vast majority of VenturePAC dollars go to Republican candidates and committees, with $80,500 directed to 34 GOP-affiliated causes in 2004, compared to just $36,500 for 21 Democratic Party efforts.

Mark Heesen, president of the NVCA, says that the discrepancy is more practical than philosophical. Put simply, he believes Republicans will maintain control of the U.S. Congress after the next election. Thus, he wants his group aligned with the winning side.

“Republicans will keep the House, and maybe even pick up a few seats because of reapportionment,” Heesen explains. “The Senate is always a dicier situation because they are statewide races, but there are far more Democratic incumbents than Republican incumbents involved this year, so the Democrats have a lot more to defend. It’s unlikely that they will take the Senate, but it’s possible, so our Senate contributions are more evenly distributed.”

VenturePAC gave $8,000 to three Democratic Senators during Q1 2004, and $9,000 to five Republican senators during the same time period. This is a shift from the 2001-2002 election cycle, when VenturePAC contributions to GOP Senators or Senate hopefuls tallied $185,700 (from January 2001 through September 2002), compared to just $37,200 for the Democrats.

More importantly, VenturePAC picks winners. About 85% of the candidates VenturePAC supported won during the past two election cycles, including an amazing 142 of 150 House candidates in 2002.

“We are lucky in that both parties want to be perceived as helping the VC entrepreneurial process,” Heesen says. “While most industries have one political party as their champion, we have been able to go to the dance with both. We support stem-cell research, which is opposed by most conservatives, but our tax orientation is generally more Republican.”

Heesen acknowledges that VCs tend to be a bit more liberal than the typical financial pro, and partially attributes the divergence to the political climate in venture hotbeds of Boston, San Francisco and New York City. In fact, a number of NVCA board members simultaneously contribute to Democratic candidates and the GOP-slanted VenturePAC (on behalf of their firms).

For example, Steven Krausz of U.S. Venture Partners – and current NVCA treasurer – has donated to both Kerry and Joe Lieberman’s campaigns. Ditto for VenturePAC backer Ann Lamont of Oak Investment Partners, who also has given to Kerry and Howard Dean’s White House bids.

There is no solid evidence for the “VCs tend to be Democrats” theory, although a survey last week by PE Week Wire does give more insight into voting trends.

The unscientific poll had nearly 600 respondents. When asked whom readers were likely to support in the upcoming presidential election, Kerry and Bush were separated by just one vote (272-271) with the Massachusetts senator holding the slim lead.

Ralph Nader and Libertarian Party candidate Gary Nolan also were included, but received just 12 and six votes, respectively. More interesting, however, is that more respondents said they voted for Bush than for Al Gore in 2000, by a 270-203 mark.

Survey respondents cited the economy as their most salient electoral issue, followed by the war in Iraq and then terrorism. Finally, more than 56% of those surveyed referred to themselves as moderates, while self-described conservatives made up about 25% of the voters and 17% were comprised of self-described liberals.

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