Venture capital group recommends changes to foreign investment bill

The National Venture Capital Association (NVCA) is recommending several changes to the Foreign Investment Risk Review Modernization Act (FIRRMA) regarding amendments to the Committee on Foreign Investment in the United States (CFIUS).

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The bill expands the mandate of the Committee on Foreign Investment in the United States (CFIUS) to review minority investments into U.S. critical technology companies. NVCA, in comments to the House Financial Services Committee, said the bill should be changed to maintain the intent of the bill but mitigate damage to U.S. startups that need capital to grow.

“The reality is investors now have a world of choices on where to deploy capital,” Bobby Franklin, president and CEO of NVCA, wrote to House Financial Services Committee leaders. “Policymakers must ensure the U.S. remains the most attractive destination in the world for new company formation so we can continue to experience the benefits of entrepreneurship.”

Specifically, NVCA recommended amending the passive investment exemption to reflect true passivity; expanding the universe of exempted countries to include additional U.S. allies and better focus CFIUS’s attention; providing better direction to CFIUS on the meaning of critical technology; and enacting changes that do not stifle foreign strategic investors that have become a key aspect of startup financing.

“If we fail in this regard, other countries stand ready to take advantage of obstacles we put in place to the free flow of risk capital,” Franklin said. “It is therefore imperative that as FIRRMA is considered that policymakers are sensitive to its impact on investment in startups.”