03:43 AM

Venture Capital Avoids Government Regulation - But Challenges Remain

Silicon Valley venture capital firms will be pleased that "Financial Services Chairman Barney Frank has rejected a Treasury plan to subject venture capital firms to "systemic risk" regulation."

The Wall Street Journal reports that VCs haven't gotten away scot-free.

While Mr. Frank and colleague Paul Kanjorski (D., Pa.) plan to exempt VCs from the most onerous regulation, their draft directs the Securities and Exchange Commission to define appropriate reporting requirements for such firms.

Venture Capital Firms Allowed to Live - WSJ.com

This was one of the complaints in my recent interview with Bob Ackerman, founder of Allegis Capital. (VCWatch: Code Red In Silicon Valley Says Bob Ackerman - Government Killing Innovation)

However, Silicon Valley's VC industry still faces several considerable challenges. The amount of seed funding has greatly diminished and several large firms haven't been able to raise new funds.

The lack of seed funding could hurt the region in a few years time because it will limit the number of viable startups.