Oct 18, 2019

Venture capital industry wants more clarity on foreign investment rules

Illustration: Aida Amer/Axios

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.

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Why it matters: "M&A has been one of the areas hit hardest by the trade war, with deal value for North American target companies with a Chinese acquirer on pace to fall by over 90% since peaking in 2016," a new report from PitchBook finds.

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Report: U.S. government to probe TikTok

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The U.S. government plans to probe TikTok over national security concerns, sources tell CNBC.

Why it matters: The viral video-sharing app owned by Chinese tech giant ByteDance has cause concern for U.S. policymakers in recent months. As its reach grows within the U.S. — particularly among children — there's anxiety as to whether the app collects and shares data from American users with the Chinese state.

Go deeperArrowNov 1, 2019

Scoop: Ted Lieu pens letter to Mulvaney demanding answers on WH cyber departures

Rep. Ted Lieu in the Capitol. Photo: Bill Clark/CQ-Roll Call via Getty Images

Rep. Ted Lieu (D-Calif.) sent a letter to acting chief of staff Mick Mulvaney on Friday, obtained by Axios, asking the White House to explain the recent series of departures from various cybersecurity offices, as we reported earlier this week.

The state of play: "A White House data breach would give our adversaries an untold advantage in almost every foreign policy and national security matter," Lieu wrote.

Go deeperArrowOct 25, 2019