Connect with us

California

Will the courts kill California’s venture capitalist economy?

Published

on

Will the courts kill California’s venture capitalist economy?


On Wednesday, a federal appeals court heard oral arguments for and against the Federal Trade Commission’s antitrust case against Microsoft and game developer Activision Blizzard’s announced merger.

Having studied venture capital for over a decade, I believe the court’s decision will have a far broader reach than video games or this one case. Its ruling will either signal that venture capital investing can remain a cornerstone of the United States economy or that the nation’s leading antitrust regulators have a right to pull it back.

Venture capital involves high-touch support for young, innovative, and risky firms. It offers them financing, mentorship, strategic guidance, and network access from some of America’s leading entrepreneurs and companies.

California receives the vast majority of the nation’s venture capital investments. In 2022, it accrued $104 billion of it. The next two runner ups did not even have one-third of that amount.

Advertisement

While most companies that receive venture capital funding fail, others become significant successes. Research I conducted in 2015 showed that three out of the five largest global companies and one-fifth of publicly traded U.S. companies have received venture capital financing.

These numbers have only gone up since then. In a 2021 study I conducted with Will Gornall from the University of British Columbia, we found that venture capital-backed companies account for 41% of total U.S. market capitalization and 62% of U.S. public companies’ research and development spending. Among public companies founded within the last fifty years, venture capital-backed companies accounted for half by quantity, three-quarters by value, and more than 92% of all research and development spending and patent value.

The U.S. venture capital industry is an important ingredient of California’s growth engine. Without it, Apple, Netflix, Airbnb, Zoom, and many other California-based companies would likely have never come to fruition. Our lives would be vastly different.

However, without mergers and acquisitions, California’s venture capital economy cannot function.

For the venture capital industry to thrive, venture capitalists must be able to have successful exits. Exits enable venture capitalists to return money to their investors and raise new funds to invest in the next generation of startups. Even though the most talked about venture capital exits are the venture capital-backed companies that go public, ten or more merge or are acquired for each that goes public. Without a viable option of successful mergers and acquisitions, the venture capital industry will likely come to a halt.

Advertisement

With the proposed Microsoft and Activision merger, the FTC fears the potential of centralizing industry market share. However, by making this and other mergers and acquisitions unviable exit avenues for venture capitalists, the FTC could instead hurt the tens of thousands of entrepreneurs who rely on venture capital investments to get their ideas going.

If venture capitalists know their investments are unlikely to exit via acquisitions, they will develop higher bars for investing.

In fact, in my experience, many venture capitalists often know that acquisitions are the only viable options for many of their portfolio companies. Blocking venture capitalists’ exits will result in less investment, fewer startups, less innovation, and a greater chance of California losing the competitive position it has in fields ranging from healthcare to artificial intelligence.

If venture capitalists cannot ever cash out, as their companies get acquired by more established entities, they will reduce investments throughout the entire economy. We will have not only fewer acquisitions. We will miss on the next Apple, Uber, and Amazon.

A government that can shut down the next Google or Netflix out of fears that mergers and acquisitions can slow industry growth would not be good for California’s economic growth, and it would not be good for its consumers, either. Here’s hoping the appeals court makes the right decision.

Advertisement

Ilya A. Strebulaev is the David S. Lobel Professor of Private Equity at Stanford University and a research associate at the National Bureau of Economic Research. He also is the founder and director of the Stanford GSB Venture Capital Initiative. He is a co-author of “The Venture Mindset,” to be published by Portfolio/Penguin Random House in May 2024.



Source link

Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

California

California schools seeing fewer kids as birth rates fall

Published

on

California schools seeing fewer kids as birth rates fall


California saw a decline in public school enrollment for an eighth consecutive year, amid falling birth rates and the migration of families with children out of state.

Why It Matters

Declining enrollment in California has been an issue since before the COVID-19 pandemic.

It is an indicator of some of the issues facing the state, including falling birth rates, high housing costs pushing families out of the state and lasting impacts from the pandemic

On top of this, lower enrollment has major financial and social consequences for California’s public schools.

Advertisement

What To Know

In the academic year 2024-25, California schools had a total of 5,806, 221 students enrolled, according to data released by California’s Department of Education on Wednesday. This is a 7 percent decrease from the 6,235,520 recorded a decade ago.

There is also more than a 20 percent difference between the size of the number of students leaving school (488,295) and those starting it (384,822).

Stanford University education professor and economist Thomas Dee told The Los Angeles Times: “These losses largely reflect the fact that there are now substantially fewer school-age children in the state.

“This demographic decline is due to both lower birth rates and net migration of families with children out of California — e.g., due to housing costs and the growth of work-from-home employment.”

Indeed, California, like much of the rest of the United States, has a declining birth rate.

Advertisement

In 2023, the most recent year for which the California Department of Public Health records birth data, there were 400,129 births. This is down almost 100,000 births from a decade ago, when there were 494,392 births.

A file photo of John Marshall High School in Los Angeles, taken on March 13, 2020, shows students waiting outside after being let out early following an announcement of a district-wide closure caused by the…


AP

The state’s fertility rate was 49 per 100,000 residents in 2023—down from 60.6 per 100,000 residents in 2013.

However, California State Superintendent of Public Instruction Tony Thurmond stressed that there has been growth in transitional kindergarten (TK) enrollment—a new grade that serves four-year-olds.

What People Are Saying

Thomas Dee also spoke about “the students who fled public schools at the beginning of the COVID-19 pandemic who still have not returned.”

“The public school enrollment losses also reflect an enduring increase in private and home-school enrollment,” he added.

Advertisement

Tony Thurmond said: “While we have more work to do, the dramatic growth in TK is inspiring and shows that providing rigorous and quality programs can be a key ingredient to bringing more families back to our schools.”

What Happens Next

It remains to be seen whether enrollment will continue to decline in California and what impacts that will have.



Source link

Advertisement
Continue Reading

California

California to sue over U.S. Senate revoking state’s EV mandate, strict emission standards

Published

on

California to sue over U.S. Senate revoking state’s EV mandate, strict emission standards



California to sue over U.S. Senate revoking state’s EV mandate, strict emission standards – CBS Sacramento

Advertisement













Advertisement



























Advertisement

Watch CBS News


California is fighting back a day after the U.S. Senate voted to put the brakes on the state’s clean vehicle policies.

Advertisement

Be the first to know

Get browser notifications for breaking news, live events, and exclusive reporting.


Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement



Source link

Continue Reading

California

Democrats warn GOP is weakening filibuster as Senate moves to nullify California’s electric vehicle mandate | CNN Politics

Published

on

Democrats warn GOP is weakening filibuster as Senate moves to nullify California’s electric vehicle mandate | CNN Politics




CNN
 — 

The Republican-led Senate moved Wednesday to overturn key Biden-era waivers allowing California to set its own vehicle emissions, a major blow to that state’s effort to regulate pollution from cars and trucks that could have broad environmental impacts for the rest of the country.

And they will do it bypassing the 60-vote threshold typically needed to approve such a measure, infuriating Democrats who warned Republicans — despite their promises not to — were weakening the legislative filibuster. Republican leaders denied that was their intent and vowed to preserve the filibuster forever.

Republicans were livid when at the end of former President Joe Biden’s term, the Environmental Protection Agency greenlit California’s plan to phase out the sale of gas-powered cars by 2035, shifting the state towards electric vehicles. Republicans say the California plan will hurt the US economy and impact the rest of the country because other states follow its emissions rules.

Advertisement

In response, they readied action under the Congressional Review Act, which allows Congress to claw back agency rules without needing 60 votes to overcome a filibuster.

Tensions have built for weeks as Senate Republicans deliberated behind closed doors about whether to push the measure through despite a finding from the House’s Government Accountability Office that the CRA could not be used to nullify the California emissions waiver. Senate Republicans don’t believe the GAO has the authority to determine that.

The Senate parliamentarian — the neutral arbiter of Senate procedure — deferred to the GAO viewpoint. Despite that, the Senate took a series of votes to put it on a track to pass these CRAs in the coming days.

California has for many years set its own emission standards separate from the federal government. For decades, federal law has granted California the authority to do so, but the waiver has become a partisan football in recent years. President Donald Trump revoked that authority during his first term in 2019, before Biden reinstated it in 2022.

In one of the Biden administration’s last major actions on climate, the EPA in 2024 finalized California’s waiver – effectively greenlighting the state’s plan to phase out sales of new gas vehicles by 2035, the first regulation of its kind in the US.

Advertisement

California’s vehicle regulations matter a great deal to the auto industry because close to 20 other states and the District of Columbia have adopted them. And they have a big impact on climate policy; emissions from vehicles are one of the largest sources of planet-warming pollution in the US.

Senate Majority Whip John Barrasso called California’s efforts a “fantasyland” that will hurt ranchers and farmers in his home state of Wyoming.

“California’s EV mandates ban the sale of gas-powered cars and trucks. They threaten the freedom of every American to choose what they drive,” he said on the floor. “EVs currently make up 7 percent of the U.S. market. Even in California, they account for only 20 percent of vehicle sales. And sales are stalling. Yet California’s radical mandates require 35 percent of all vehicle sales to be electric by 2026 – 6 months from now. By 2035, it jumps to 100 percent.”

Senate Democrats have argued that not accepting the parliamentarian’s guidance sets a dangerous precedent, and they are particularly concerned that the GOP may do it again as she sets some of the perimeters of what will be allowed in the massive tax, spending cuts and immigration reconciliation bill moving through Congress now.

“It’s going nuclear, plain and simple. It’s overruling the parliamentarian. And second, what goes around comes around,” Senate Democratic Leader Chuck Schumer told reporters on Tuesday, referring to the so-called nuclear option, which is when the majority party changes Senate rules on a party line vote instead of 67-vote supermajority typically required to make a change.

Advertisement

Democrats insist that the Californian regulations were created as “waivers” under the Clean Air Act, meaning that they are not considered “rules” that can be overturned through the CRA. The GAO — which weighed in on the issue when that chamber passed these CRAs recently with bipartisan support — agreed.

However, Senate Republicans insist that they are not defying the parliamentarian and have said that Democrats’ concern for weakening the filibuster is hypocritical, coming from the party that has expressed opposition to the filibuster’s role in recent years.

“The only people that have attempted to get rid of the legislative filibuster – the Democrats – every single one up there that’s popping off and spouting off has voted, literally, to get rid of the legislative filibuster,” Senate Majority Leader John Thune told reporters at a press conference on Tuesday.

“This is a novel and narrow issue that deals with the Government Accountability Office and whether or not they ought to be able to determine what is a rule and what isn’t, or whether the administration and the Congress ought to be able to make that decision,” he added.

Sen. Martin Heinrich of New Mexico, the top Democrat on the Senate Energy and Natural Resources Committee, echoed Schumer’s concerns in a statement ahead of Wednesday’s vote.

Advertisement

“If Senate Republicans force a vote on the California Clean Air Act Waivers, they set a precedent that will allow Congress to overturn nearly any agency decision nationwide,” he warned. “I urge my colleagues to reject this gross overreach.”

“By opening this door, Republicans threaten to destroy our permitting and regulatory system, leading to higher energy costs for Americans and making it impossible for new developments to come online. Indeed, nearly every major and minor project the federal government touches could be stalled, creating significant uncertainty if not complete chaos. That is not what the American people want, and it cannot be what Senate Republicans want, either,” continued Heinrich.



Source link

Advertisement
Continue Reading
Advertisement

Trending