Venture capital favors a Joe Biden victory with record 2020 election donations - (James Thorne)
A Joe Biden win and a blue wave have emerged as the preferred outcome for venture capital investors—earning full-throated endorsements from investors like Revolution CEO Steve Case and donations from the likes of SV Angel founder Ron Conway and Sequoia partner Michael Moritz.
The 2020 elections have struck a nerve with venture capitalists. Political donations from the VC industry have reached a record $69.7 million in the 2020 election cycle as of Oct. 23, according to the Center for Responsive Politics, a nonprofit that tracks campaign finance data. That total was nearly double the previous record of $37 million spent by the industry during the 2016 election.
As the donations have grown, they've also become bluer: Democrats received 79% of the funds contributed by the VC industry, up from 70% in the 2016 election cycle, Center for Responsive Politics data shows.
Many VC firms have clustered in tech hubs like San Francisco and New York, which tend to be more liberal. But the industry's predilection for Biden is also a result of his policy proposals and venture capital's grievances with President Trump.
The two candidates take vastly different approaches to immigration reform, an area where venture capitalists want to see change. The Trump administration's efforts to curb immigration, such as the decision in June to temporarily ban H-1B visas, have been widely opposed by the tech industry.
The National Venture Capital Association has fought the Trump administration in court over its efforts to undo the international entrepreneur rule, which grants foreign entrepreneurs the ability to enter or remain in the US to build their business. The industry's top trade group has also lobbied for a startup visa program that would entice founders from other countries to start companies in the US.
"We really do believe that Vice President Biden, if he's elected, could move to do immigration reform," said Jeff Farrah, general counsel at NVCA, which does not endorse individual candidates. "We're doing a lot of the spade work right now to get a startup visa proposal in very good working order."
Biden's plan calls for $2 trillion worth of investment in clean energy and sustainable infrastructure, a potential boon for the cleantech startup ecosystem. The candidate has framed this investment as a way to compete with China in emerging industries such as electric vehicles.
"Broadly speaking there's a lot that the Biden administration wants to accomplish that they're going to need venture capital participation in order to accomplish," said Justin Field, SVP of government affairs at the NVCA. "Clean Energy is number one; expanding economic opportunity to more areas of the country through technology innovation; countering the rise of China; 21st century jobs, etc. The list goes on."
In the event of a Biden victory, his ability to execute on those spending plans through legislation would greatly depend on the makeup of the Senate, Field said.
Some tech investors may see Biden's choice of running mate, Kamala Harris, as another cause for optimism. Harris was San Francisco’s district attorney before serving as California's junior senator. She has taken a more moderate approach toward regulating tech giants than their democratic critics like Elizabeth Warren and Bernie Sanders.
"Silicon Valley is already used to their relationship with her as a senator," said Nihal Mehta, a general partner at Eniac Ventures. "I think that's very beneficial for the industry."
One area where Biden does not score as highly among VCs is taxes. Trump's signature legislative achievement delivered significant business and individual tax cuts. However, those changes fundamentally affect venture capital's business model, Field said.
Biden's proposal would tax long-term capital gains as ordinary income for people earning more than $1 million per year. Field said the idea is "dangerous" and could move capital away from long-term investments.
Private market participants consider taxes and economic growth to be among the top policy areas at stake in this election, according to a PitchBook News reader survey.
One element working in Biden's favor is the memory of an Obama-era tax change that promotes startup investment. The qualified small business stock exemption gives investors a tax exclusion on capital gains earned from investments in small business stock, provided the stake was held for at least five years.
"I think that has been some of the greatest fuel for investors in terms of tax treatment," Mehta said.