Venture capital industry wants more clarity on foreign investment rules

The National Venture Capital Association (NVCA) submitted a long list of comments on Thursday to CFIUS — the Committee on Foreign Investment in the United States, an interagency group housed within Treasury — regarding a year-old law that added more stringent rules for foreign investments in U.S. firms.

What's happening: The Foreign Investment Risk Review Modernization Act — or FIRRMA — is meant to protect strategic American tech like artificial intelligence.

• The NVCA's letter addressed 11 areas of the law that the lobby thinks need more clarity or tweaking, lest it become unnecessarily difficult for VCs to operate (particularly in cases that weren't intended to fall under the law).
• These areas include things like: determining whether a VC firm is based in the U.S. (tricky if it has overseas offices!), determining who is a "foreign person" (so many have partners working in said overseas offices!), defining "material nonpublic information" so that it doesn’t include basic reporting to a company board, and limiting CFIUS' reach to truly U.S.-based companies.

What they're saying: "NVCA has been at the table during FIRRMA's consideration because it stands to have a significant impact on the venture and startup ecosystem," Bobby Franklin, head of the NVCA, wrote on TechCrunch at the time of the law's passage.

• "Few in the startup world have dealt with CFIUS, but those who have understand its power and implications. It's the opaque government entity that blew up the Broadcom-Qualcomm transaction for national security reasons and has been called the 'ultimate regulatory bazooka.'"

Between the lines: The comments made also it clear that the lack of clarity could lead to companies and investors submitting more deals for review out of caution, and that can lead to a big problem: too much work, not enough resources, and ultimately a really slow process. No startup trying to run as fast as possible wants that.

• Read the full letter here.