The Senate Should Finish the Good Work They Started

With ongoing partisan politics fostering endless inertia in Congress, it would be easy for us citizens to throw in the towel and assume that nothing of legislative substance will get done this year.  Yet VCs and entrepreneurs are eternal optimists and, in fact, we actually have a bill poised to do great things for venture-backed portfolio companies showing signs of significant bipartisan momentum.

S. 1933 or the “Re-opening American Capital Markets To Emerging Growth Companies Act” was originated in the Senate late last year and is now being considered by members of Congress.  With the House poised to pass their version of this bill at some point this week, there is no better time for the Senate to finish the good work they started and put their bill up for a vote — and pass it — as soon as possible.

Essentially, the provisions in the bill provide a regulatory on-ramp for emerging growth companies (defined as under $1 billion in revenues) for a period of up to five years after an IPO.  This on-ramp allows smaller companies to save massive amounts of time and costs that today are required to be spent because of Sarbanes Oxley compliance and other regulations.  Once the company reaches $1 billion in revenues or five years post IPO – they leave the on-ramp and comply with existing regulations.  The bill also allows for these smaller companies to communicate more effectively with potential investors – something that has become increasingly difficult post the Spitzer settlement which separates investment banking from analysts research.  A good summary can be found here at the NVCA website but suffice it to say that the bill has many provisions that will make the IPO process significantly less daunting than it is today.  Its easy to assume that all is well and good in the IPO market with the hype surrounding the Facebook filing — but it is also wrong.  Make no mistake.  We need more IPOs overall – both large and small.  They are good for the economy and create plenty of jobs.

Here at Foundry Group, we strongly support this legislation and are encouraging our CEOs to do the same.   Given the track record of our Colorado Senators Udall and Bennet in supporting entrepreneurship, I am optimistic that they will act in our best interest.  Still I urge them and other Senators to bring S. 1933 to the floor and vote yes for a smoother path to IPO.