Defining "Venture Capital"
NVCA president Mark Heesen gave a “state of the VC industry” talk in Chapel Hill last Friday, and included discussion of Chris Dodd's financial reform. Specifically, Heesen said he was heartened that the proposal clearly distinguished between “venture capital” and “private equity.” As we’ve discussed before, however, the Dodd Bill doesn’t actually define either asset class – instead kicking that responsibility over to the SEC. It’s a tricky job, since hybrid firms would almost certainly try to game the nomenclature, in order to “become” whichever type of firm is less regulated. Moreover, enforcement of a firm’s adherence to definitional guidelines would be difficult without all firms agreeing to open up their portfolios to federal scrutiny.
