If you’ve been in the valley lately, you can hear the grumbling. The good ‘ol boys are wondering whether or not Obama will change sacred characteristics of the venture capital model–like *gasp* requiring funds to be transparent.
Obama’s budget plan already signals changes in tax policy. And new fears were raised by Treasury Secretary Timothy Geithner’s statement Thursday that advisers to venture capital funds, private equity firms and hedge funds should for the first time be required to register with the Securities and Exchange Commission and file reports to enable the government to assess whether the funds “individually or collectively pose a threat to financial stability.” Venture capitalists are apprehensive about changes to their model.
“You mean a model where, in the last twenty years, 11 of the funds generated 70% of the returns is flawed?”
Obviously…
One particular fear of the VC community was captured in a blog posting by Benchmark Capital partner Bill Gurley, in the form of an open letter to Geithner: “Depending on the regulation, this could require VCs to disclose specific metrics about the private companies in which they have invested, robbing these companies of one of the key benefits of being private,” he wrote.
Essentially, he’s saying that Facebook, a private-company with half a billion in investor capital, would be obligated to disclose that they’ve been losing money.
How absurd. I hope this never happens [/sarcasm off].