National Venture Capital Association (NVCA)
National Venture Capital Association (NVCA)
The National Venture Capital Association (NVCA), founded in 1973, is an organization of venture capital firms, corporate backers, and individuals dedicated to professionally investing private capital in new companies. In their own words, they exist to "define, serve, and represent the interests of the venture capital and private equity industries" by, among other things, promoting the public policy interests of the venture capital and entrepreneurial communities.
The NVCA seeks to foster greater understanding of the necessity of investing in young companies and their role in the overall health of the United States economy. To that end, it works to stimulate the flow of risk equity capital to emerging and developing companies. It also aims to promote communication between venturing bodies throughout the United States and strives to improve the level of knowledge of the venturing process in government, universities, and the general business community. In support of these activities, the NVCA conducts research, hosts educational and networking programs, and serves as an information clearinghouse for its members. It makes available the results of its research in various publications, such as its Annual Economic Impact of Venture Capital Study, Job Creation Survey, Expert Analysis of Legislative and Regulatory Issues, and other scholarly works. Specific information available through the NVCA includes industry statistics, venture capital news, and listings of venture capital firms. NVCA headquarters are located at 1655 North Fort Myer Drive, Suite 850, Arlington, VA 22209; 703-524-2549. The association also maintains a Web site at www.nvca.org.
According to a report published on the NVCA Web site, "Private Equity Fundraising Maintained Strong Momentum in First Quarter of 2006," private equity fundraising by venture capital firms started at a strong pace in 2006, following the very healthy showing during 2005. In 2005 the number of funds reported on in the report summed to 194 and accounted for just over $26 million in venture capital investments.
New business owners who lack the collateral and experience to garner traditional bank financing often must seek funds elsewhere. Many entrepreneurs seek "venture capital" informally, obtaining seed money from friends and family or wealthy individuals willing to risk an investment. Others, of course, seek funding by professional firms. In these cases, the new firm assesses any number of business plans to determine which holds the greatest potential for success and presents this plan to prospective venture capital firms. The venture capital firm which finances a new venture will have an ongoing relationship with the start-up, providing coaching, training, management expertise, and other services, and often holding a seat on the young company's board of directors. Should your business be accepted for funding by a venture capital firm, expect the organization to take an active part in shaping your business.
According to the NVCA, funds used by venture capital firms come from a variety of sources, including institutional investors such as pension funds, foundations and endowments, insurance companies, wealthy individuals, professional money managers, foreign investors, and the venture capitalists themselves.
The NVCA actively advocates public policies that are beneficial to the entrepreneurial and venture communities. The association also provides educational programs accessible throughout the United States to its membership. Programs are conducted by industry scholars, practitioners, and analysts. In addition, the NVCA offers a director and officer insurance program intended for both members and their portfolio companies that provides risk management and loss control protection.
The Regional Member Committee program, a network of liaison groups that represents members from across the United States, works with the NVCA Board of Directors and staff to design and enhance the programs offered by the association. The committees, which are composed of members from each of the six regions, include Education, Public Relations, Research, Tax Policy and others. Finally, the NVCA's affiliate organization, the American Entrepreneurs for Economic Growth (AEEG), seeks to "serve as a united voice on public policy issues for entrepreneurs." It represents thousands of small business owners and executives across the country.
NVCA has several requirements of potential members. Those seeking membership (by invitation) must be capital organizations, investment advisors, corporate investors, or buyout funds. Members need not be full time venture capitalists, but they must have as their primary business the deployment of venture capital. They also must represent capital funds and utilize a professional approach before and after they make an investment, including the maintenance of a continuing interest in companies they sponsor. The managers of the business must be American citizens or resident aliens and operate from an office located in the United States. In addition, members must invest from a dedicated U.S.-based venture capital pool of funds of at least one million dollars. Finally, the members' business must be subject to U.S. taxation and laws. Dues are scalable and depend on the amount of capital under management.
Long, Mark H. Financing the New Venture. Adams Media, 2000.
Lundgren, Douglas A. Venture Capital: An Authoritative Guide for Investors, Entrepreneurs, and Managers. McGraw-Hill, 1998.
Mendell, Emily. Private Equity Fundraising Maintained Strong Momentum in First Quarter of 2006. NVCA and Thomson Venture Economics, April 2006.
"National Venture Capital Association and Dow Jones VentureOne Release First Ever Study on Differing Practices and Attitudes at Venture Capital-Backed Company Boards." PR Newswire. 10 April 2006.
Whitford, David. "We Can Fix Anything: Women can play the VC game and win big." Fortune Small Business. 1 April 2006.
Hillstrom, Northern Lights
updated by Magee, ECDI