I've spent the last few weeks, in the occasional moments of downtime, reading through the NVCA's four pillar plan for reopening the IPO markets with the goal of restoring liquidity to Venture Capitalism.
Any executive or board member of a venture backed startup doing $20M in annual revenue or more should get really familiar with this content. The NVCA's efforts along these lines will be important input to your financing strategy for the next 2-3 years.
Here's my summary of the four pillars:
1) Ecosystem Partners: Working with the global investment banking and accounting firms to help them develop programs that are more relevant to small cap companies. One method discussed is encouraging smaller boutique investment banking firms to provide ongoing coverage and research on small cap companies in exchange for fasttracking the boutique bankers as co-leads when the VC backed firms go public.
2) Enhanced Liquidity Paths: Improve efficiency in the crossover between private and public markets by connecting pre-IPO firms with committed investors which makes the IPO process easier on the company and reduces post-IPO volitility.
3) Tax Incentives: Extend capital gain holding period to 2 years (from one year now) and implement short term tax incentives to stimulate IPOs.
4) Regulatory Review: Review SOX and reduce regulation of pre-public and smaller public companies by fine tuning the abuse controls that were created to keep large companies honest.
To see the plan or to get some more context on the situation check out the following sources:
- Q&A with Dixon Doll, partner at Venture Capital firm DCM, outgoing Chairman of the NVCA, and major contributor to the NVCA's Four Pillar Plan.
- Press release announcing the NVCA Four Pillar Plan to restore liquidity to the US Venture Capital Industry. The release includes a nice outline of the four pillars that can be read in less than five minutes.
- Online version of the NVCA Presentation of the Four Pillar Plan to restore liquidity to the US Venture Capital Industry.