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Comment by jacquesm | Hacker News Reader

What are they in danger from ? Having to open their books ?

That seems like a pretty stretchy way of using the word 'danger'.

If venture capital would truly be in danger then that would imply that funds would be forbidden to operate, but that is not the case at all.

There is simply a shifting of allowing funds to operate without oversight to one where the authorities have an inside view at what is going on.

Since the IRS and other arms of the government already have this insight what is wrong with allowing the SEC access to similar information ?

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> Since the IRS and other arms of the government already have this insight

Actually, they don't. The IRS doesn't get much of anything that isn't directly tied to income and expense.

Note that this regulation treats VC funds more harshly than criminal enterprises.

Yes, criminal enterprises can report income and expenses and pay taxes through the IRS without any fear that the said reports will be used against them. (In fact, in some cases one can even pay the drug-for=recreational-use tax and avoid most/all of the criminal sanctions. Few bother because the tax is extremely high. However, I suspect that a few rich stamp collectors have paid for the relevant stamps just to build their collection.)

Not only would there be costs associated with complying with regulations, but simply from a capitalist standpoint there is little reason (as discussed in the article) for the government to have a say in VC practices. Investors know the risk they are undertaking, have a solid financial standing, and are not trading in public securities.

I feel like the article wanted to point out the side-affects of this new legislation as it applies to VC funding. I don't think the intention of the law was to necessarily monitor VC operations, but with such a broad regulation that's what's going to happen.

Keep in mind though that at the same time there are some things the government is doing to promote small business, such as providing billions in funding for the Small Business Association. Not all bad I guess, but still not a fan...

It costs money to comply with regulations. SOX, for example, costs on average of $1.7 million/year.

http://fei.mediaroom.com/index.php?s=43&item=204

While (hopefully) this regulation won't be as burdensome, it doesn't need to be that large to cause problems. VC funds aren't that large.

There is no benefit and potentially large cost to regulating VC.

The article you quote there to make your point clearly states that the 1.7 million dollar figure is an average taken over a group of companies, to make a meaningful statement about this you'd have to take in to account how big the revenue streams were in order to gage the impact.

taken by itself the 1.7 million figure is useless.

There is a cost to running a VC operation, reporting is part of that cost. if - and it remains to be seen if it really will go that way - these laws will be made to bear on VC companies then you can bet that the cost of compliance will be a small fraction of the size of the fund.

No need to start saying that 'venture capital is in danger'.

Venture capital companies possibly slightly less profitable would be a better title.

The problem with SOX is that it has a large fixed cost component. This disproportionately hurts smaller companies. You may bet that costs will be proportional to the size of the fund, but I see no reason to expect that.

There are also knock-on effects: if VC becomes less profitable, some investors will put their money into other instruments. The problem isn't just that we might get smaller profits on existing VC funds, the problem is that we might get fewer investments into VC.

The sole benefit is that congress and the president get to pretend they are doing something about the financial crisis.

If you want to say my title was a little overblown, fine. But it doesn't change the fact that this proposed regulation poses a significant risk of reducing the amount of VC invested into startups.

You would think that an article like this would answer exactly these questions, but no- just a string of generalities with no details. Mourn the death of such a glorious news source!

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