September 24th, 2019
How did venture capital investment become the dominant mode of funding for high technology, inextricably linked in the popular consciousness with innovation, massive economic growth, and equally massive investor profits? By the early 1970s, venture capitalists were gaining name recognition as a distinct category separate from other types of investors. But the profession itself was haphazard and struggling. Its practices, strategies, and organizational structures varied widely from firm to firm, and investment to investment, and venture capitalists were dogged by regulations that nipped away at their most profitable activities and everyday operations. The limited partnership model, a structure which allowed the venture capitalist to invest collective funds of institutional capital, earn a management fee, and collect a share of the capital gains besides, was rarely used and was sharply hampered by ERISA regulation after 1974. SEC regulations, intended to curb insider trading and aggressive or fraudulent sales tactics, made it difficult for venture capitalists to make equity investments without the cost or hassle of registering those securities, and made it nearly impossible for those unregistered securities to be sold on the secondary market. Many practicing venture capitalists felt their most profitable ways of doing business were unfairly and in some cases fatally hamstrung by regulations intended to curb the historical abuses of other investors. This talk explores how the modern form of venture capital, the institutionally-supported, limited partnership dedicated equity investment firm, was promoted through cultural and professional cultural circuits in the late 1970s and early 1980s. This eventually lead to focused, coherent policy change specifically intended to favor the institutionally supported, limited partnership firm model as the expense of other investment modes. This talk particularly focuses on the contributions of the Small Business Administration’s 1976 Task Force on Venture and Equity Capital, led by William J. Casey, a lawyer, venture capitalist, and businessman who would later go on to head the CIA under Ronald Reagan.
Speaker: M.R. Sauter is an Assistant Professor of Sociotechnical Cybersecurity Studies at the University of Maryland College of Information Studies, focusing on innovation economy public-private partnerships, and how corporate priorities impact the security and rights of individuals and communities. They are the author of The Coming Swarm: DDoS Actions, Hacktivism, and Civil Disobedience on the Internet. They hold a PhD in Communication Studies from McGill University in Montreal, QC, a masters degree in Comparative Media Studies from MIT, and have held research fellowships at the Berkman-Klein Center for Internet and Society, and New America. They can be found at oddletters.com and on twitter @oddletters.
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