• Proposed Legislation Could Be Boon to Technology Firms
  • March 3, 2010 | Authors: Deeba Anwari; David M. Lay
  • Law Firm: LeClairRyan - Richmond Office
  • The economic downturn has dried up many of the usual sources of capital from venture capitalists and other investors on which smaller technology companies depend. Venture capitalists invested a total of $17.7 billion in 2,795 deals in 2009, marking the lowest level of dollar investment since 1997, according to the joint MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association. Financing challenges have led some of these companies to halt research projects, slash jobs or file for bankruptcy. The Virginia General Assembly is banking on proposed legislation that would make investments in Virginia technology firms more attractive, and in turn, address the inability of young technology companies to raise badly needed capital.

    Bipartisan bill HB 523/SB 428, entitled the “Virginia Innovation Investment Act,” is a capital gains exclusion on income earned from a qualified investment in an advanced technology company (one that falls within the categories indicated below) with $3 million or less in annual revenue that is headquartered in Virginia. The purpose of the bill is to increase the availability of funding for these companies immediately, without having to make a large appropriation of state dollars in a tight budget climate. If enacted, the legislation would help companies in the businesses of advanced computing, advanced manufacturing, agricultural technology, biotechnology, electronic device technology, energy, environmental technology, information technology, medical device technology and nanotechnology to pay the salaries of their scientists, continue their research and even hire workers to help the companies develop and commercialize new technology. To qualify for the deduction, the investment must be made between the dates of July 1, 2010, and June 30, 2013.

    The bill has been lauded by new Virginia Governor Bob McDonnell, who commented on the technology sector in Virginia: “This is an industry of high-paying jobs in a fast-growing career field. Smart states look at this sector for future economic development. We will as well.” Technology leaders in Virginia also see the measure as a way to better compete for younger industry players that might have chosen to locate in another state where tax breaks are more readily available for investors in early-stage technology companies.