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Full report:
ß DowJones VentureSource (“VentureSource”) reported that the amount invested by venture capitalists in the U.S. in the third quarter of 2010 was approximately $5.5 billion in 662 deals, a decrease from the $7.7 billion invested in 740 deals in 2Q10. The PwC/NVCA MoneyTree™ report based on data from Thomson Reuters (the “MoneyTree™ Report”) also reported a decrease in 3Q10 venture capital investment, with $4.8 billion invested in 780 deals, compared to $6.9 billion being invested in 962 deals in 2Q10. Despite the decrease in 3Q10, investments by venture capital funds in 2010 is on pace to modestly surpass the amount invested in 2009, although 2009 was the weakest year for venture investment since 2003.
ß VentureSource reported 102 acquisitions of venture-backed companies in the U.S. in 3Q10, for a total of $5.7 billion, an increase from the $4.8 billion paid in 85 acquisitions reported for 2Q10.Thomson Reuters and the National Venture Capital Association reported 104 acquisitions of venture-backed companies in the third quarter of 2010, compared to 97 currently being reported for 2Q10. Acquisitions of venture-backed companies in the first three quarters of 2010 have almost already surpassed total acquisitions in all of 2009. The largest acquisition in 3Q10 was Walt Disney’s acquisition of Playdom for $563 million.
ß There were 14 venture-backed IPOs in the third quarter of 2010 raising a total of $1.2 billion, compared to 17 in 2Q10 raising a total of $1.3 billion, according to Thomson Reuters and the National Venture Capital Association. Although IPOs declined in the third quarter, there have already been significantly more IPOs in the first three quarters of 2010 (40) than in all of 2009 VentureSource reported nine venture-backed IPOs in 3Q10 raising a total of $723 million, compared to 15 IPOs raising $900 million in 2Q10. The largest IPO in 3Q10 was by Green Dot Corp. raising $164 million.
ß Fundraising by U.S. venture capital funds increased in the third quarter, with 45 firms raising $3 billion in the quarter, compared to 51 firms raising $2.1 billion in the second quarter of 2010, according to Thomson Reuters and the National Venture Capital Association. The largest fundraising in 3Q10 was $750 million by IVP. Both Thomson Reuters/NVCA and VentureSource report VC fundraising in 2010 to be behind the pace of 2009, which was the lowest year for fundraising in six years.
ß Since the first quarter of 2009, venture capitalists have invested significantly more in companies ($41.4 billion per VentureSource, $34.9 billion per the MoneyTree) than new capital that has been committed to venture funds ($22.7 billion per VentureSource, $25.4 billion per Thomson Reuters/NVCA), which is not sustainable over a prolonged period.
ß The Silicon Valley Venture Capital Confidence Index produced by Professor Mark Cannice at the University of San Francisco reported the confidence level of Silicon Valley venture capitalists at 3.7 on a 5 point scale, which was a significant increase from the previous quarter’s reading of 3.28.
Monday, December 13, 2010
SEC proposes regulations under Dodd-Frank affecting venture capital
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During October and November 2010, the U.S. Securities and Exchange Commission proposed several key regulations called for by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which Congress passed and President Obama signed into law in July 2010. Now, through its rulemaking proposals in October and November 2010 (the Proposed Regulations) which are summarized below, the SEC has begun to fill in a number of important details left unspecified by Congress in the original legislation.
The Proposed Regulations affect all private funds which claim exemption from the Investment Company Act of 1940 under Section 3(c)(1) or 3(c)(7) of that statute. This includes practically all hedge, leveraged-buyout, venture-capital, real-estate, mezzanine-debt, and distressed-debt funds, as well as funds-of-funds. As they relate specifically to private funds, the Proposed Regulations do three major things:
* First, they propose definitions and details regarding certain exemptions from registration with the SEC under the Investment Advisers Act of 1940 (the Advisers Act). (Dodd-Frank eliminated, effective in July 2011, the exemption which most private funds had been relying on until now, replacing it with new exemption criteria.)
* Second, the Proposed Regulations would require every firm that serves as an investment adviser to any 3(c)(1) or 3(c)(7) fund to file with the SEC and update annually a Form ADV. This requirement would apply even to smaller advisory firms which will remain exempt from registration because their assets under management are below Dodd-Frank's registration threshold.
* Third, the Proposed Regulations would impose new recordkeeping and reporting requirements on registered investment advisers.
Key definitions and details included in the Proposed Regulations
Advisers whose only clients are private funds and whose assets under management (AUM) are less than $150 million will generally remain exempt from registration under the Advisers Act when Dodd-Frank becomes effective in July 2011. (For advisers who have at least some non-fund clients, the applicable AUM threshold is $100 million.) The Proposed Regulations give guidance on how AUM is to be measured for this purpose.
Advisers whose only clients are venture capital funds will remain exempt from registration, regardless of the amount of their AUM. The Proposed Regulations would define the term "venture capital fund" for this purpose.
Advisers who qualify as "family offices" will also remain exempt from registration under the Advisers Act, regardless of the amount of their AUM. The Proposed Regulations would define the term "family office" for this purpose.
Exemption for advisers to private funds with cumulative AUM less than $150 million
The Advisers Act defines the term "assets under management" by reference to the "securities portfolios" with respect to which an investment adviser provides "continuous and regular supervisory or management services." The Proposed Regulations provide guidance on the calculation of AUM for private funds, as follows:
* An adviser to a private fund must include the fund's unfunded capital commitments in its AUM.
* An adviser to a private fund must include the value of proprietary assets, assets which the adviser manages on an uncompensated basis, and assets of foreign clients in its AUM.
* Advisers must use a fair-value methodology when measuring AUM, and cannot simply rely on cost basis.
Exemption for advisers to venture capital funds
Dodd-Frank exempts advisers solely to venture capital funds from registration under the Advisers Act. The Proposed Regulations define the term "venture capital fund" to include only private funds which satisfy all of the following criteria:
* The private fund invests only in equity securities of qualifying portfolio companies to provide them with business expansion and operating capital. At least 80% of the private fund's interest in the issuing company must be acquired directly from the company and not from the issuer's existing equity holders. An issuer can be a qualifying portfolio company if no more than 20% of the private fund's interest was acquired from founders or other preexisting investors.
* The private fund controls, or provides significant managerial services to, the qualifying portfolio companies.
* The private fund does not incur leverage at the private fund level, other than certain permitted short-term borrowings.
* The private fund is a closed-end fund, i.e., it does not offer routine redemption rights to investors.
* The private fund holds itself out as a venture capital fund to investors.
To be a "venture capital fund" a private fund may invest only in "qualifying portfolio companies." The Proposed Regulations define that term to include only an entity which satisfies all of the following criteria:
* is not publicly traded at the time of the venture capital fund's investment,
* does not incur leverage in connection with the investment by the venture capital fund,
* uses the capital provided by the venture capital fund for business expansion or operating purposes, and
* is not itself a fund.
Exemption for Family Offices
Dodd-Frank exempts family offices from registration under the Advisers Act. The Proposed Regulations define "family office" as an adviser whose clients include only persons who are family members. A "family member" includes a spouse, a spousal equivalent, a subsequent spouse, a parent, a sibling, a child (including children by adoption and stepchildren), and a spouse or spousal equivalent of the foregoing.
In the event of an involuntary transfer from a family member, the Proposed Regulations would afford the adviser a four-month transition period in which to register under the Advisers Act or transfer the management of the assets. In case of a divorce, a former spouse could continue to receive advice for the assets already being managed by the family office, but could not make additional investments with such adviser.
The clients of a family office may include any charitable organization that is funded solely by a family member, and any trust or estate existing for the sole benefit of a family client, or any investment vehicle wholly-controlled by a family client and operated for the sole benefit of family clients. Clients may also include non-family members who are executive officers, directors, trustees or general partners of the adviser, or other persons who have participated in the investment activities of the family office for at least 12 months.
New filing requirements for advisers exempt from registration
Under the Proposed Regulations, all investment advisers which are exempt from registration under the Advisers Act, but whose clients include any 3(c)(1) or 3(c)(7) private fund, would nevertheless be required to comply with certain limited reporting obligations. These exempt advisers would be required to file a limited Form ADV with the SEC and provide certain information about their activities to the SEC. The information required to be reported would include, among other things, the adviser's form of organization, a description of its other business activities, its financial industry affiliations, the identity of its control persons and owners, and any disciplinary history for the adviser and its employees.
The Proposed Regulations would require exempt advisers to file their first limited Form ADV by August 20, 2011, and to update their Form ADV filings annually.
Additional Reporting for Advisers to Private Funds
The Proposed Regulations amend Form ADV for a registered adviser to a private fund (exempt advisers will also be required to provide certain of this information in its limited Form ADV) in order to require reporting of the following information:
* The amount of AUM.
* Information regarding its private funds, including: (1) names and jurisdictions of such funds (though a code can be used to preserve anonymity); (2) general partners and directors; (3) names and jurisdictions of any foreign financial regulatory authorities are subject; (4) status as a master/feeder.
* Whether private fund is a fund of funds.
* The fund's investment strategy. The fund's gross and net asset value, minimum investment and number of beneficial owners.
* Whether clients of the adviser are solicited to in the fund, and the percentage of the adviser's clients invested in the fund.
* The number and types of investors in the fund.
* The name of the adviser's auditor, whether it is independent and registered with the PCAOB and whether audited financials are distributed to investors.
* The name of the adviser's prime broker and whether it is SEC-registered and acts as a fund's custodian.
* The name and role of the fund's administrator.
* The name of each marketer, whether it is a related person of the adviser, its SEC file number and URL for any website used to market the fund.
* Information regarding employees, including the number employees registered as representatives of a broker-dealer.
* Information regarding the adviser's clients, including disclosure as to whether any are business development companies, insurance companies or other investment advisers and whether any are subject to ERISA.
* Disclosure about participation in client transactions: The Proposed Regulations require advisers with discretionary authority to determine whether brokers or dealers used in client transactions would be required to report whether any such brokers or dealers are related persons.
* Information about the adviser's non-advisory activities.
* Advisers with $1 billion in AUM may be subject to future rules regarding certain incentive-based compensation arrangements.
During October and November 2010, the U.S. Securities and Exchange Commission proposed several key regulations called for by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which Congress passed and President Obama signed into law in July 2010. Now, through its rulemaking proposals in October and November 2010 (the Proposed Regulations) which are summarized below, the SEC has begun to fill in a number of important details left unspecified by Congress in the original legislation.
The Proposed Regulations affect all private funds which claim exemption from the Investment Company Act of 1940 under Section 3(c)(1) or 3(c)(7) of that statute. This includes practically all hedge, leveraged-buyout, venture-capital, real-estate, mezzanine-debt, and distressed-debt funds, as well as funds-of-funds. As they relate specifically to private funds, the Proposed Regulations do three major things:
* First, they propose definitions and details regarding certain exemptions from registration with the SEC under the Investment Advisers Act of 1940 (the Advisers Act). (Dodd-Frank eliminated, effective in July 2011, the exemption which most private funds had been relying on until now, replacing it with new exemption criteria.)
* Second, the Proposed Regulations would require every firm that serves as an investment adviser to any 3(c)(1) or 3(c)(7) fund to file with the SEC and update annually a Form ADV. This requirement would apply even to smaller advisory firms which will remain exempt from registration because their assets under management are below Dodd-Frank's registration threshold.
* Third, the Proposed Regulations would impose new recordkeeping and reporting requirements on registered investment advisers.
Key definitions and details included in the Proposed Regulations
Advisers whose only clients are private funds and whose assets under management (AUM) are less than $150 million will generally remain exempt from registration under the Advisers Act when Dodd-Frank becomes effective in July 2011. (For advisers who have at least some non-fund clients, the applicable AUM threshold is $100 million.) The Proposed Regulations give guidance on how AUM is to be measured for this purpose.
Advisers whose only clients are venture capital funds will remain exempt from registration, regardless of the amount of their AUM. The Proposed Regulations would define the term "venture capital fund" for this purpose.
Advisers who qualify as "family offices" will also remain exempt from registration under the Advisers Act, regardless of the amount of their AUM. The Proposed Regulations would define the term "family office" for this purpose.
Exemption for advisers to private funds with cumulative AUM less than $150 million
The Advisers Act defines the term "assets under management" by reference to the "securities portfolios" with respect to which an investment adviser provides "continuous and regular supervisory or management services." The Proposed Regulations provide guidance on the calculation of AUM for private funds, as follows:
* An adviser to a private fund must include the fund's unfunded capital commitments in its AUM.
* An adviser to a private fund must include the value of proprietary assets, assets which the adviser manages on an uncompensated basis, and assets of foreign clients in its AUM.
* Advisers must use a fair-value methodology when measuring AUM, and cannot simply rely on cost basis.
Exemption for advisers to venture capital funds
Dodd-Frank exempts advisers solely to venture capital funds from registration under the Advisers Act. The Proposed Regulations define the term "venture capital fund" to include only private funds which satisfy all of the following criteria:
* The private fund invests only in equity securities of qualifying portfolio companies to provide them with business expansion and operating capital. At least 80% of the private fund's interest in the issuing company must be acquired directly from the company and not from the issuer's existing equity holders. An issuer can be a qualifying portfolio company if no more than 20% of the private fund's interest was acquired from founders or other preexisting investors.
* The private fund controls, or provides significant managerial services to, the qualifying portfolio companies.
* The private fund does not incur leverage at the private fund level, other than certain permitted short-term borrowings.
* The private fund is a closed-end fund, i.e., it does not offer routine redemption rights to investors.
* The private fund holds itself out as a venture capital fund to investors.
To be a "venture capital fund" a private fund may invest only in "qualifying portfolio companies." The Proposed Regulations define that term to include only an entity which satisfies all of the following criteria:
* is not publicly traded at the time of the venture capital fund's investment,
* does not incur leverage in connection with the investment by the venture capital fund,
* uses the capital provided by the venture capital fund for business expansion or operating purposes, and
* is not itself a fund.
Exemption for Family Offices
Dodd-Frank exempts family offices from registration under the Advisers Act. The Proposed Regulations define "family office" as an adviser whose clients include only persons who are family members. A "family member" includes a spouse, a spousal equivalent, a subsequent spouse, a parent, a sibling, a child (including children by adoption and stepchildren), and a spouse or spousal equivalent of the foregoing.
In the event of an involuntary transfer from a family member, the Proposed Regulations would afford the adviser a four-month transition period in which to register under the Advisers Act or transfer the management of the assets. In case of a divorce, a former spouse could continue to receive advice for the assets already being managed by the family office, but could not make additional investments with such adviser.
The clients of a family office may include any charitable organization that is funded solely by a family member, and any trust or estate existing for the sole benefit of a family client, or any investment vehicle wholly-controlled by a family client and operated for the sole benefit of family clients. Clients may also include non-family members who are executive officers, directors, trustees or general partners of the adviser, or other persons who have participated in the investment activities of the family office for at least 12 months.
New filing requirements for advisers exempt from registration
Under the Proposed Regulations, all investment advisers which are exempt from registration under the Advisers Act, but whose clients include any 3(c)(1) or 3(c)(7) private fund, would nevertheless be required to comply with certain limited reporting obligations. These exempt advisers would be required to file a limited Form ADV with the SEC and provide certain information about their activities to the SEC. The information required to be reported would include, among other things, the adviser's form of organization, a description of its other business activities, its financial industry affiliations, the identity of its control persons and owners, and any disciplinary history for the adviser and its employees.
The Proposed Regulations would require exempt advisers to file their first limited Form ADV by August 20, 2011, and to update their Form ADV filings annually.
Additional Reporting for Advisers to Private Funds
The Proposed Regulations amend Form ADV for a registered adviser to a private fund (exempt advisers will also be required to provide certain of this information in its limited Form ADV) in order to require reporting of the following information:
* The amount of AUM.
* Information regarding its private funds, including: (1) names and jurisdictions of such funds (though a code can be used to preserve anonymity); (2) general partners and directors; (3) names and jurisdictions of any foreign financial regulatory authorities are subject; (4) status as a master/feeder.
* Whether private fund is a fund of funds.
* The fund's investment strategy. The fund's gross and net asset value, minimum investment and number of beneficial owners.
* Whether clients of the adviser are solicited to in the fund, and the percentage of the adviser's clients invested in the fund.
* The number and types of investors in the fund.
* The name of the adviser's auditor, whether it is independent and registered with the PCAOB and whether audited financials are distributed to investors.
* The name of the adviser's prime broker and whether it is SEC-registered and acts as a fund's custodian.
* The name and role of the fund's administrator.
* The name of each marketer, whether it is a related person of the adviser, its SEC file number and URL for any website used to market the fund.
* Information regarding employees, including the number employees registered as representatives of a broker-dealer.
* Information regarding the adviser's clients, including disclosure as to whether any are business development companies, insurance companies or other investment advisers and whether any are subject to ERISA.
* Disclosure about participation in client transactions: The Proposed Regulations require advisers with discretionary authority to determine whether brokers or dealers used in client transactions would be required to report whether any such brokers or dealers are related persons.
* Information about the adviser's non-advisory activities.
* Advisers with $1 billion in AUM may be subject to future rules regarding certain incentive-based compensation arrangements.
Statement by NVCA President Mark Heesen and TechNet President Rey Ramsey Regarding Support for Extending Clean Energy Tax Incentives
The National Venture Capital Association (NVCA) and TechNet strongly support the addition of two critical energy tax provisions to the tax bill. The Treasury Grant Program, Section 1603 and the Advanced Energy Manufacturing Credit, Section 48C are both due to expire at the end of the year and, if they are allowed to lapse, investment into clean energy technology companies in the United States will suffer. Failure to extend these critical energy tax programs will further widen the lead that other countries – most notably China – now enjoy in the global clean energy marketplace.
Hundreds of renewable energy companies have applied for and received Section 1603 “grants in lieu of tax credits.” In turn, these companies have used the cash grants to fuel their growth in the creation of thousands of new “green jobs” in the U.S. Without Section 1603, the investment and production tax credits intended to benefit these companies will remain dormant and fail to achieve their legislative purpose.
Similarly, Section 48C of the Internal Revenue Code provides a 30% tax credit for investments in facilities that manufacture components for the production of renewable or clean energy. The program was over-subscribed, and the 48C credit was instrumental in incentivizing the location of manufacturing plants and the creation of high-wage, skilled “green jobs” in the United States.
We believe that tax policy must be used to link American innovation with American production. All too often in the past innovating American companies have located their manufacturing plants in other countries. The provisions contained in Sections 1603 and 48C are vital to our ongoing global competitiveness. The NVCA and TechNet are asking Congress to take this opportunity to ensure our clean energy future with these extensions.
The economic downturn has significantly reduced the amount of private sector lending. For technologies that require significant upfront costs, the 1603 and 48C programs have been critical. Both of these programs proved extremely popular and the demand remains; extending them will help the clean tech industry move forward as the economy continues its slow recovery.
According to NVCA President Mark Heesen, “For the first time, tax policy was used to link American innovation – where the U.S. has always been strong –with American production – where too often in the past innovating companies have located their manufacturing plants in other countries so that they could remain viable companies.”
TechNet President and CEO Rey Ramsey added, “Clean tech represents an enormous economic opportunity for the United States and if we are to be a global leader in this area, we must support the growth of companies and entrepreneurs. The Treasury grant programs are effective in creating good paying jobs nationwide. Therefore, they ought to be extended.”
About TechNet:
TechNet is the national, bipartisan network of CEOs that promotes the growth of technology industries and the economy by building long-term relationships between technology leaders and policymakers and by advocating a targeted policy agenda. TechNet’s members represent more than one million employees in the fields of information technology, clean energy, biotechnology, e-commerce and finance. TechNet has offices in Washington, DC, Palo Alto, Sacramento, Seattle, Boston and Austin,Texas. Web address: www.technet.org.
Hundreds of renewable energy companies have applied for and received Section 1603 “grants in lieu of tax credits.” In turn, these companies have used the cash grants to fuel their growth in the creation of thousands of new “green jobs” in the U.S. Without Section 1603, the investment and production tax credits intended to benefit these companies will remain dormant and fail to achieve their legislative purpose.
Similarly, Section 48C of the Internal Revenue Code provides a 30% tax credit for investments in facilities that manufacture components for the production of renewable or clean energy. The program was over-subscribed, and the 48C credit was instrumental in incentivizing the location of manufacturing plants and the creation of high-wage, skilled “green jobs” in the United States.
We believe that tax policy must be used to link American innovation with American production. All too often in the past innovating American companies have located their manufacturing plants in other countries. The provisions contained in Sections 1603 and 48C are vital to our ongoing global competitiveness. The NVCA and TechNet are asking Congress to take this opportunity to ensure our clean energy future with these extensions.
The economic downturn has significantly reduced the amount of private sector lending. For technologies that require significant upfront costs, the 1603 and 48C programs have been critical. Both of these programs proved extremely popular and the demand remains; extending them will help the clean tech industry move forward as the economy continues its slow recovery.
According to NVCA President Mark Heesen, “For the first time, tax policy was used to link American innovation – where the U.S. has always been strong –with American production – where too often in the past innovating companies have located their manufacturing plants in other countries so that they could remain viable companies.”
TechNet President and CEO Rey Ramsey added, “Clean tech represents an enormous economic opportunity for the United States and if we are to be a global leader in this area, we must support the growth of companies and entrepreneurs. The Treasury grant programs are effective in creating good paying jobs nationwide. Therefore, they ought to be extended.”
About TechNet:
TechNet is the national, bipartisan network of CEOs that promotes the growth of technology industries and the economy by building long-term relationships between technology leaders and policymakers and by advocating a targeted policy agenda. TechNet’s members represent more than one million employees in the fields of information technology, clean energy, biotechnology, e-commerce and finance. TechNet has offices in Washington, DC, Palo Alto, Sacramento, Seattle, Boston and Austin,Texas. Web address: www.technet.org.
Thursday, December 2, 2010
Proposed regulations exempting advisers to “venture capital funds” from the registration requirements
On Friday November 19, 2010, the SEC issued Release No. IA‐ 3111 in which it articulated, among other things, the proposed regulations exempting advisers to “venture capital funds” from the registration requirements of the Investment Advisers Act of 1940. The proposed regulations are mandated by Section 407 of the Dodd‐Frank Wall Street Reform and Consumer Protection Act, and are expected to be codified by new Rule 203(l)‐1 under the Investment Advisers Act of 1940.
Overview
The proposed regulations are narrowly tailored to exempt those serving in an adviser capacity to venture capital funds. They do not apply to advisers to other types of private investment funds, such as private equity funds or hedge funds. Key points that are relevant to venture capital fund advisers are as follows:
1. A “venture capital fund” would qualify as such under the exemption only if it meets the following requirements:
* The fund represents itself as a venture capital fund to investors;
* The fund invests in equity securities of private companies in order to provide operating and business expansion capital (i.e., “qualifying portfolio companies,”) and at least 80 percent of each company’s securities owned by the fund were acquired directly from the qualifying portfolio company cash (and cash equivalents) and U.S. Treasuries with a remaining maturity of 60 days or less;
* The fund directly, or through its investment advisers, offers or provides significant managerial assistance to, or controls, the qualifying portfolio company;
* The fund is not registered under the Investment Company Act and has not elected to be treated as a “business development company”;
* The fund does not borrow or otherwise incur leverage (other than limited short‐term borrowing); and
* The fund does not offer its investors redemption or other similar liquidity rights except in extraordinary circumstances.
2. The exemption applies without regard to the number of venture capital funds advised by the adviser or the size of such funds.
3. The exemption is not mandatory, thus an adviser may voluntarily register.
4. The SEC has proposed a grandfathering provision for those existing funds that make venture capital investments and hold themselves out as venture capital funds. The provision applies to any venture capital fund that (i) represented to investors and potential investors at the time the fund offered its securities that it is a venture capital fund; (ii) has sold securities to one or more investors prior to December 31, 2010; and (iii) does not sell any securities to, including accepting any additional capital commitments from, any person after July 21, 2011.
Complete article
Overview
The proposed regulations are narrowly tailored to exempt those serving in an adviser capacity to venture capital funds. They do not apply to advisers to other types of private investment funds, such as private equity funds or hedge funds. Key points that are relevant to venture capital fund advisers are as follows:
1. A “venture capital fund” would qualify as such under the exemption only if it meets the following requirements:
* The fund represents itself as a venture capital fund to investors;
* The fund invests in equity securities of private companies in order to provide operating and business expansion capital (i.e., “qualifying portfolio companies,”) and at least 80 percent of each company’s securities owned by the fund were acquired directly from the qualifying portfolio company cash (and cash equivalents) and U.S. Treasuries with a remaining maturity of 60 days or less;
* The fund directly, or through its investment advisers, offers or provides significant managerial assistance to, or controls, the qualifying portfolio company;
* The fund is not registered under the Investment Company Act and has not elected to be treated as a “business development company”;
* The fund does not borrow or otherwise incur leverage (other than limited short‐term borrowing); and
* The fund does not offer its investors redemption or other similar liquidity rights except in extraordinary circumstances.
2. The exemption applies without regard to the number of venture capital funds advised by the adviser or the size of such funds.
3. The exemption is not mandatory, thus an adviser may voluntarily register.
4. The SEC has proposed a grandfathering provision for those existing funds that make venture capital investments and hold themselves out as venture capital funds. The provision applies to any venture capital fund that (i) represented to investors and potential investors at the time the fund offered its securities that it is a venture capital fund; (ii) has sold securities to one or more investors prior to December 31, 2010; and (iii) does not sell any securities to, including accepting any additional capital commitments from, any person after July 21, 2011.
Complete article
Wednesday, November 24, 2010
Alpha Males Take Greater Risks: Study Links Finger Length to Behavior
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Potential investors might wish to examine the fingers of their financial advisor prior to signing over any savings. A new study from Concordia University has found the length between the second and fourth finger is an indicator of high levels of prenatal testosterone, risk-taking and potential financial success in men.
The findings, published in the journal of Personality and Individual Differences, suggest that alpha males may take greater risks in relationships, on the squash court and in the financial market.
"Previous studies have linked high testosterone levels with risky behaviour and financial success," says senior researcher Gad Saad, Concordia University Research Chair in Evolutionary Behavioral Sciences and Darwinian Consumption as well as a marketing professor at the John Molson School of Business. "We investigated the relationship between prenatal testosterone and various risk proclivities. Our findings show an association between high testosterone and risk-taking among males in three domains: recreational, social and financial."
"Since women tend to be attracted to men who are fit, assertive and rich, men are apt to take risks with sports, people and money to be attractive to potential mates. What's interesting is that this tendency is influenced by testosterone exposure -- more testosterone in the womb can lead to more risks in the rink, the bar and the trading floor in later in life," says first author and Concordia doctoral student, Eric Stenstrom.
Link only observed in men
Saad and his team analyzed risk-taking among 413 male and female students using a survey. "Prenatal testosterone exposure not only influences fetal brain development," adds study co-author and graduate student, Zack Mendenhall, "but it also slows the growth of the index finger relative to the sum of the four fingers excluding the thumb."
The change in finger length produced by testosterone provides a handy measure of prenatal testosterone exposure. The study compared the length of the index finger with all four digits (known as the rel2 ratio) and found that those with lower ratios were more likely to engage in risk-taking. These findings were further confirmed by the additional measurement of the ratio between the index and ring finger. These correlations were only observed in men.
"A possible explanation for the null effects in women is that they do not engage in risky behaviour as a mating signal, whereas men do," says Professor Saad.
Potential investors might wish to examine the fingers of their financial advisor prior to signing over any savings. A new study from Concordia University has found the length between the second and fourth finger is an indicator of high levels of prenatal testosterone, risk-taking and potential financial success in men.
The findings, published in the journal of Personality and Individual Differences, suggest that alpha males may take greater risks in relationships, on the squash court and in the financial market.
"Previous studies have linked high testosterone levels with risky behaviour and financial success," says senior researcher Gad Saad, Concordia University Research Chair in Evolutionary Behavioral Sciences and Darwinian Consumption as well as a marketing professor at the John Molson School of Business. "We investigated the relationship between prenatal testosterone and various risk proclivities. Our findings show an association between high testosterone and risk-taking among males in three domains: recreational, social and financial."
"Since women tend to be attracted to men who are fit, assertive and rich, men are apt to take risks with sports, people and money to be attractive to potential mates. What's interesting is that this tendency is influenced by testosterone exposure -- more testosterone in the womb can lead to more risks in the rink, the bar and the trading floor in later in life," says first author and Concordia doctoral student, Eric Stenstrom.
Link only observed in men
Saad and his team analyzed risk-taking among 413 male and female students using a survey. "Prenatal testosterone exposure not only influences fetal brain development," adds study co-author and graduate student, Zack Mendenhall, "but it also slows the growth of the index finger relative to the sum of the four fingers excluding the thumb."
The change in finger length produced by testosterone provides a handy measure of prenatal testosterone exposure. The study compared the length of the index finger with all four digits (known as the rel2 ratio) and found that those with lower ratios were more likely to engage in risk-taking. These findings were further confirmed by the additional measurement of the ratio between the index and ring finger. These correlations were only observed in men.
"A possible explanation for the null effects in women is that they do not engage in risky behaviour as a mating signal, whereas men do," says Professor Saad.
High Level of Practical Intelligence a Factor in Entrepreneurial Success
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General intelligence is not enough. Practical intelligence can mean the difference between entrepreneurial success or failure.
Psychologists have identified multiple kinds of intelligence, but a University of Maryland researcher's study has found one--practical intelligence--to be an indicator of likely entrepreneurial success.
J. Robert Baum, Director of Entrepreneurship Research at the University of Maryland, defines practical intelligence as "an experience based accumulation of skills and explicit knowledge as well as the ability to apply that knowledge to solve every day problems," he said. In other words, practical intelligence can be referred to as "know-how" or common sense.
Learning orientation has an impact on entrepreneurship success. Some people learn little from their experiences and therefore don't acquire the practical intelligence necessary to begin a successful business venture, said Baum. Practical intelligence is the result of an experimental hands-on operating style that leads to specific learning. "Those with high practical intelligence tend to develop useful knowledge by doing and learning, not by watching or reading," he said.
People with strong general intelligence sometimes fail at business. Conversely, there are plenty of examples of those with comparatively lower IQs who are successful in business. Practical intelligence helps explain this surprising phenomenon, says Baum.
To determine how practical intelligence impacted entrepreneurs' success, Baum and his fellow researchers, Barbara Jean Bird of American University and Sheetah Singh of the University of Maryland, sought evidence that the interaction of entrepreneurs' practical intelligence and growth goals led to increased venture success.
In other words, can practical intelligence explain why some are successful and others are not? Yes, to some degree, it can, he said.
In fact, the model of practical intelligence interacting with growth goals successfully predicted venture increase in sales and employment 27 percent of the time.
Comparing responses to a set of business scenarios from founders of newly started businesses and founder/CEO's of successful and established printing companies, they were able to identify those founders with different levels of practical intelligence.
"If there was little difference in the comparative answers, the newcomer was considered to have high practical intelligence. A wide variance of answers indicated low practical intelligence," Baum said.
There are many kinds of intelligence, including emotional, social and creative. Practical intelligence is just one; but a critical one for entrepreneurial success, said Baum.
The study will be published in an upcoming issue of Personnel Psychology.
Other factors needed for entrepreneurial success include a demand for the product from customers that will result in a profit, having financial resources, industry experience and a strategic plan that includes specific goals.
Baum also said personal characteristics are important as well in venture creation and growth.
For example, entrepreneurs typically have confidence in what they are undertaking and have the ability to make quick decisions and take action. They are also willing to use their knowledge or what they have learned to experiment and try new approaches to improve the process or product.
Practical intelligence is gained by learning from past experiences and using that knowledge to enhance the enterprise, said Baum.
"A person with high practical intelligence who starts and grows a company in a specific industry and who has specific experience and has learned specific things from that experience and who has specific venture growth goals will grow their company faster and more successfully that someone who does not have the same level of practical intelligence," said Baum.
General intelligence is not enough. Practical intelligence can mean the difference between entrepreneurial success or failure.
Psychologists have identified multiple kinds of intelligence, but a University of Maryland researcher's study has found one--practical intelligence--to be an indicator of likely entrepreneurial success.
J. Robert Baum, Director of Entrepreneurship Research at the University of Maryland, defines practical intelligence as "an experience based accumulation of skills and explicit knowledge as well as the ability to apply that knowledge to solve every day problems," he said. In other words, practical intelligence can be referred to as "know-how" or common sense.
Learning orientation has an impact on entrepreneurship success. Some people learn little from their experiences and therefore don't acquire the practical intelligence necessary to begin a successful business venture, said Baum. Practical intelligence is the result of an experimental hands-on operating style that leads to specific learning. "Those with high practical intelligence tend to develop useful knowledge by doing and learning, not by watching or reading," he said.
People with strong general intelligence sometimes fail at business. Conversely, there are plenty of examples of those with comparatively lower IQs who are successful in business. Practical intelligence helps explain this surprising phenomenon, says Baum.
To determine how practical intelligence impacted entrepreneurs' success, Baum and his fellow researchers, Barbara Jean Bird of American University and Sheetah Singh of the University of Maryland, sought evidence that the interaction of entrepreneurs' practical intelligence and growth goals led to increased venture success.
In other words, can practical intelligence explain why some are successful and others are not? Yes, to some degree, it can, he said.
In fact, the model of practical intelligence interacting with growth goals successfully predicted venture increase in sales and employment 27 percent of the time.
Comparing responses to a set of business scenarios from founders of newly started businesses and founder/CEO's of successful and established printing companies, they were able to identify those founders with different levels of practical intelligence.
"If there was little difference in the comparative answers, the newcomer was considered to have high practical intelligence. A wide variance of answers indicated low practical intelligence," Baum said.
There are many kinds of intelligence, including emotional, social and creative. Practical intelligence is just one; but a critical one for entrepreneurial success, said Baum.
The study will be published in an upcoming issue of Personnel Psychology.
Other factors needed for entrepreneurial success include a demand for the product from customers that will result in a profit, having financial resources, industry experience and a strategic plan that includes specific goals.
Baum also said personal characteristics are important as well in venture creation and growth.
For example, entrepreneurs typically have confidence in what they are undertaking and have the ability to make quick decisions and take action. They are also willing to use their knowledge or what they have learned to experiment and try new approaches to improve the process or product.
Practical intelligence is gained by learning from past experiences and using that knowledge to enhance the enterprise, said Baum.
"A person with high practical intelligence who starts and grows a company in a specific industry and who has specific experience and has learned specific things from that experience and who has specific venture growth goals will grow their company faster and more successfully that someone who does not have the same level of practical intelligence," said Baum.
Monday, November 22, 2010
NVCA Commends Makower Study on the FDA Impact on Med Tech Innovation
Contact: Emily Mendell, NVCA. 610-565-3904, emendell@nvca.org
Today the National Venture Capital Association commended the release of a new study led by professor and entrepreneur, Dr.Josh Makower, entitled "FDA Impact on U.S. Medical Technology Innovation."
The study, which was the first of its kind and conducted with support from the NVCA and the Medical Device Manufacturers Association (MDMA), surveyed more than 200 medical technology company CEOs regarding their experiences with the Food and Drug Administration (FDA) approval process for new medical technologies. The study found that inefficiencies at the FDA have led to U.S. medical technologies being available in Europe on average two years sooner than in the United States.
NVCA President Mark Heesen stressed the importance of the study to U.S. patients and
the economy while committing to continue working with the FDA on improving the
approval pathway:
“This study quantifies, in no uncertain terms, the challenge that small medical
device companies have when seeking approval for their products in the United States,”
said Heesen. “The current approval path is paved with inefficiency and uncertainty for
our most important innovators, compelling them to launch their medical breakthroughs
overseas years before offering them here in the U.S. Not only does this environment hurt American patients who would benefit from these innovations sooner rather than later, but it also hurts our entire health care system and the economy. We feel strongly that there are meaningful changes that can be made at the FDA which would improve efficiency and transparency without compromising on safety. We will continue working with the FDA to explore these remedies and feel confident that officials are committed to long term solutions that will help advance important medical breakthroughs in this country.”
About NVCA
The National Venture Capital Association (NVCA) represents more than 400 venture
capital firms in the United States. NVCA's mission is to foster greater understanding of
the importance of venture capital to the U.S. economy and support entrepreneurial
activity and innovation. According to a 2008 Global Insight study, venture-backed
companies accounted for 12.1 million jobs and $2.9 trillion in revenue in the United
States in 2008. The NVCA represents the public policy interests of the venture capital
community, strives to maintain high professional standards, provides reliable industry
data, sponsors professional development, and facilitates interaction among its members.
The Medical Device Manufacturers Association (MDMA) also applauded the efforts by one of America’s leading med-tech entrepreneurs, Dr. Josh Makower, to examine the impact of the current regulatory environment on medical device innovation. Dr. Makower led a study that details how patients in Europe are getting access to new therapies an average of two years before patients in the United States due to regulatory challenges at the FDA.
MDMA President and CEO Mark Leahey noted the importance of working together to protect America’s leadership position in medical technology:
“This powerful study provides compelling evidence of what we have been hearing for years at MDMA: the current regulatory environment is adversely impacting innovation, patient care and job-creation here in the United States. We must all work together to ensure that the FDA’s dual mission to protect and promote the public health maintains a balance that supports innovation and improves the lives of patients.
MDMA members who participated in this study are at the forefront of developing new products to improve our quality of life. They are the small and mid-sized companies that are helping to turn around this economy, and ignite the entrepreneurial spirit that makes the United States so unique. It is critical to support their efforts to develop tomorrow’s medical advancements, and that American patients and workers are the beneficiaries of American innovation.”
Today the National Venture Capital Association commended the release of a new study led by professor and entrepreneur, Dr.Josh Makower, entitled "FDA Impact on U.S. Medical Technology Innovation."
The study, which was the first of its kind and conducted with support from the NVCA and the Medical Device Manufacturers Association (MDMA), surveyed more than 200 medical technology company CEOs regarding their experiences with the Food and Drug Administration (FDA) approval process for new medical technologies. The study found that inefficiencies at the FDA have led to U.S. medical technologies being available in Europe on average two years sooner than in the United States.
NVCA President Mark Heesen stressed the importance of the study to U.S. patients and
the economy while committing to continue working with the FDA on improving the
approval pathway:
“This study quantifies, in no uncertain terms, the challenge that small medical
device companies have when seeking approval for their products in the United States,”
said Heesen. “The current approval path is paved with inefficiency and uncertainty for
our most important innovators, compelling them to launch their medical breakthroughs
overseas years before offering them here in the U.S. Not only does this environment hurt American patients who would benefit from these innovations sooner rather than later, but it also hurts our entire health care system and the economy. We feel strongly that there are meaningful changes that can be made at the FDA which would improve efficiency and transparency without compromising on safety. We will continue working with the FDA to explore these remedies and feel confident that officials are committed to long term solutions that will help advance important medical breakthroughs in this country.”
About NVCA
The National Venture Capital Association (NVCA) represents more than 400 venture
capital firms in the United States. NVCA's mission is to foster greater understanding of
the importance of venture capital to the U.S. economy and support entrepreneurial
activity and innovation. According to a 2008 Global Insight study, venture-backed
companies accounted for 12.1 million jobs and $2.9 trillion in revenue in the United
States in 2008. The NVCA represents the public policy interests of the venture capital
community, strives to maintain high professional standards, provides reliable industry
data, sponsors professional development, and facilitates interaction among its members.
The Medical Device Manufacturers Association (MDMA) also applauded the efforts by one of America’s leading med-tech entrepreneurs, Dr. Josh Makower, to examine the impact of the current regulatory environment on medical device innovation. Dr. Makower led a study that details how patients in Europe are getting access to new therapies an average of two years before patients in the United States due to regulatory challenges at the FDA.
MDMA President and CEO Mark Leahey noted the importance of working together to protect America’s leadership position in medical technology:
“This powerful study provides compelling evidence of what we have been hearing for years at MDMA: the current regulatory environment is adversely impacting innovation, patient care and job-creation here in the United States. We must all work together to ensure that the FDA’s dual mission to protect and promote the public health maintains a balance that supports innovation and improves the lives of patients.
MDMA members who participated in this study are at the forefront of developing new products to improve our quality of life. They are the small and mid-sized companies that are helping to turn around this economy, and ignite the entrepreneurial spirit that makes the United States so unique. It is critical to support their efforts to develop tomorrow’s medical advancements, and that American patients and workers are the beneficiaries of American innovation.”
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