A review by the new Trump administration and Congress of the 2010 Dodd-Frank legislation could address many of the stifling, unintended consequences of that law.
Although designed to address abuses in the financial system that led to the 2008 recession, the far-reaching legislation had problems from the start. And while experts of all political stripes have recognized the need for changes, Dodd-Frank has remained uncorrected largely due to partisan battles on Capitol Hill—resulting in current rules that restrict growth capital without achieving the stated goals of the legislation.
Today, overly broad definitions in the statute inadvertently prohibit many non-bank corporations from investing in venture capital funds, while banks and other financial institutions are arguably incentivized to take increased risk via direct venture investing in start-ups. Hopefully, the new administration will now dig into this legislation, and will more properly address systemic risk in the financial system without unnecessarily limiting the capital available to support entrepreneurship.
[Editor’s note: To tap the wisdom of our network of Xconomists, we asked a few of them to answer questions heading into 2017 about the most pressing issues facing the innovation community, such as: “Given the political climate around diversity in tech and innovation, do you plan to change any of your programs or hiring practices? Why?” You can see other questions and answers here.]
Author: Chris Rizik
Chris Rizik is the Chief Executive Officer and Fund Manager of the Renaissance Venture Capital Fund, a venture capital fund of funds formed by a consortium of several of Michigan’s largest organizations. Chris is also a co-founder, partner, and Board chair of nanotechnology holding company Ardesta, LLC, and was a Managing Director of Avalon Technology fund, then Michigan’s largest venture capital fund and the recipient of four consecutive “Deal of the Year” awards by the Michigan Venture Capital Association.
Prior to joining Avalon, Chris was a senior partner with Dickinson Wright PLLC, one of the Midwest’s oldest law firms. He also passed the Certified Public Accounting examination and worked at PriceWaterhouse Coopers. Chris is also the founder of SoulTracks.com, America’s most popular soul music online magazine. Chris currently serves as a member of the Executive Committee of the Michigan Economic Development Corporation and the Advisory Board of the Detroit Medical Center. He is a member of the board and past Chairman of NextEnergy, the State of Michigan’s advanced energy economic development organization and accelerator, and serves on the boards of the innovative First Step Fund, the Michigan Venture Capital Association, TechTown, Leadership Detroit, U of D Jesuit High School and several venture capital funds. In early 2010, Chris was named by Crain's Detroit Business magazine as one of its "Newsmakers of the Year" for his leadership role in the advancement of venture capital and entrepreneurship in Michigan.
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