IVCA Feature: Bobby Franklin, NVCA, on ‘The National Perspective’ at 2018 IVCA Spring Luncheon

May 9, 2018

One of the major events of the year for the IVCA is the Spring Luncheon – sponsored by the firm of Ropes & Gray and CIBC Bank US – which brings together the membership to network and discuss current events in the VC and PE industries, and took place on May 3rd, 2018. The opening speaker was a familiar one to IVCA membership, Bobby Franklin, President & CEO of the National Venture Capital Association (NVCA).
 
As the voice of the U.S. Venture Capital community, the NVCA empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment.  As the venture community’s flagship trade association, the NVCA serves as the definitive resource for VC data and unites its member firms through a full range of professional services. Bobby Franklin has been President & CEO of the NVCA since 2013, and has participated in the Spring Luncheon since his tenure began. His background includes the U.S. Senate as a Legislative Assistant  and he was Executive VP for the CTIA - The Wireless Association.
 
Mr. Franklin was introduced by John Hoesley, Group Head of Technology Banking, for sponsor CIBC USA. The following is a summation of his speech topics, which centered on national Venture Capital issues that the association is working on.
 
TAX REFORM
 
Mr. Franklin began by summing up the differences from 2017 to now, with the new Tax Reform bill being “spectacular” for the Venture Capital industry. He expressed the organization efforts in the carried interest/capital gains part of the tax bill. The biggest surprise in the bill was the potential tax on stock options at the point of vesting. The NVCA worked with a coalition to stop that tax.
 
IMMIGRATION
 
He next talked about immigration, and the fact that 40-50% of start up companies have a founder that was foreign born. The NVCA has been a proponent of a “Start Up Visa,” for entrepreneurs who secure institutional capital. Even though U.S. House and Senate support is strong, it is stuck because of the “hysteria around illegal immigration.” 
 
“Twenty years ago, 90% of global Venture Capital dollars went to U.S. start-ups. Ten years ago that number fell to 81%. Last year, it was 54%,” Franklin related. He went on to say that the rest of the world is catching up, especially in providing a better environment for VC to flourish, by attracting those foreign entrepreneurs.
 
LACK OF IPOs
 
The NVCA was taking steps to make access to the public markets easier for small cap companies, but the companies found that once in therewere were factors like “short term-ism” (expectation of immediate profitability), digital valuations rather than “tick sizes” (which created a lack of interest in trading the stock) and lack of research by investment banks on a small cap before they go public. This has resulted in half the number of publicly traded companies than 20 years ago, and the NVCA and coalition forces just want to make sure that an IPO can still be a viable choice.
 
THE CFIUS PROCESS
 
The Defense Department (DOD) is looking into foreign investment into tech in the U.S., and how it affects national defense. This has resulted in a bipartisan bill that would give The Committee on Foreign Investment in the United States (CFIUS) the authority to oversee these investments much more profoundly, and would capture a lot more activity, including co-investments with American firms. The NVCA is working on the disruptions in this bill, focusing on less oversight for “passive investments” of foreign dollars and identifying the countries that the DOD is most concerned about.
 
CONCLUSION
 
In talking about the current administration, Mr. Franklin concluded his remarks. “If the House and the Senate are taken by Democrats, there is an opportunity for [the current administration] to work with them. Or, with all the news that we’ve seen lately, it could crash and burn soon.”

View event pictures here!