Should VC Funds Be Regulated? Let's Start By Redefining "VC Funds"
The big news this morning is that eBay has agreed to sell a 65% stake in Internet calling company Skype to a group of private investors, at an enterprise value of $2.75 billion. The buyers include Silver Lake Partners, Canada Pension Plan, Index Ventures and Andreessen Horowitz. Here’s my question: Does this mean that Index and Andreessen Horowitz are no longer venture capital firms? This might sound like an academic question, but I mean it as a follow-up to Alan Patricof’s op-ed from Sunday’s NY Times. For the uninitiated, Patricof and former regulator Eric Dinallo argued that venture capital firms should be excluded from proposed requirements to register as investment advisors. They argued that VC firms do not pose the types of systemic risks that the rules are designed to guard against, and that imposition of such requirements could damage venture capital firms from a cost perspective. It’s also a case that the NVCA has been making on Capitol Hill. I agree with Patricof and the NVCA, that venture capital does not pose systemic risk. It is true that the economy would be severely harmed if most VC firms went belly-up tomorrow, but there is no
