Still stuck with old ways? What will your marketing and media buy experts do if new pieces of legislation make their way through Congress?

This morning as I reached out to my laptop, the first email I opened was one from my sailing buddy. It contained a reference to an article from New York Times (see the excerpt at the end of the post)  “Obama affecting start ups”.

New regulation will further limit investments available for emerging companies, which will mean few things:

• With less seed and expansion capital floating to emerging companies, marketing budgets of these start-ups will become minimal and marketing mix as well as strategies have to be redefined. Innovative marketing approaches have to be applied. More outcome measuring marketing technologies have to be utilized to track efficiency of every dollar spent on brand awareness, prospecting, lead generation, lead nurturing, retail marketing, wholesale marketing – all areas will be effected.
• Companies that market to SMBs will have harder time selling their products or services to companies with declining buying budgets, therefore once again, marketing approaches have to be revisited.
• It its turn all that will affect media sales and publishers will have to look for alternative revenue generating sources, as competing for advertising dollars will become even harder. With CPM being dead, to those that are still in denial about adopting performance marketing models and adding Pay Per Deal advertising to their product offering, all it means is the beginning of the end.

Accordingly to the opinion piece of New York Times:

VARIOUS pieces of legislation now making their way through Congress would require private pools of investment capital to be registered with the Securities and Exchange Commission. The goal is to curtail abuses and protect the public from questionable practices. The proposed laws would cover the range of funds that deal in derivatives, auction-rate and mortgage-backed securities, highly leveraged transactions and a slew of other instruments so complicated as to defy description.

In registering, these funds would need to open their books to the government so that they could be duly monitored, thus limiting further risks to the financial system.

Unfortunately, however, with good intentions, the Obama administration and some members of Congress are aiming this legislation at all pools of private capital. That includes venture-capital funds, which pose no systemic risks and which, especially now, should be kept free of any new reporting rules and allowed the freedom to flourish.

Venture-capital funds deal solely with privately purchased equity securities in start-up companies, which are not traded in public markets. They have as their limited partners only people who meet the S.E.C.’s definition of a “qualified client” (meaning they possess a substantial amount of money to invest). These investors, who typically allocate a small percentage of their portfolios to venture capital, are familiar with risk, but it is long-term risk, stretching out 7 to 10 years. They put their faith not in publicly traded securities but in entrepreneurs, emerging technologies and new markets.

Because their business is contained within the ecosystem of limited partners, venture-capital funds and the companies in which they invest absorb all the risk: there can be no domino effect in the world financial system.

Venture-capital funds do not leverage investments with debt either, so they’re not tied to commercial banks. They don’t sell short, trade in public securities or employ any hedging techniques.

These funds already comply with Securities and Exchange Commission requirements for reporting of private offerings on Form D. This information is adequate to allow the government to keep track of an industry that, with less than $200 billion under management, makes investments that amount to no more than 0.2 percent of gross domestic product. Venture-capital funds also comply with all rules for the private placement of securities and the formation of private, unregistered investment funds, including screening investors for suitability.

The venture-capital industry has been the target of new regulations before and has experience with unintended consequences. The better part of this decade has been spent working through those created by the Sarbanes-Oxley Act of 2002, which was meant to curb accounting abuses at large corporations like Enron but ended up imposing burdensome accounting rules on small, often venture-backed companies. One section of that law, which was meant to get large corporations to lay bare their accounting practices, has cost these small companies millions of dollars a year in labor, extra audit fees and external consulting expenses.

A side effect of Sarbanes-Oxley has been to discourage initial public offerings, reducing the amount of expansion capital available for start-up companies. Indeed, the number of venture-backed public offerings, which reached 1,353 from 1991 to 1997, declined to 392 from 2001 to 2008.

It would be a shame to impose any new limits now, when venture capital is the asset class that can best help build and nurture the companies that bring about growth and job creation. The figures are compelling. In 2008, venture-backed companies that went public in previous years accounted for 12.1 million jobs and $2.9 trillion in revenues for the United States Treasury.

The names of companies financed by venture capital are legendary: Cisco, Google, Facebook, Apple, Federal Express, Staples, Yahoo, Amazon, Genentech and on and on. The privately purchased equity securities that helped start these companies supported new technological and scientific ideas, all of which led to new jobs.

Expanded regulation in financial services is inevitable and in some instances necessary. But at a time when venture capital for young companies is already squeezed by the recession, and when the economy is in serious need of new jobs, Congress should find ways to stimulate, not risk hindering, the formation of venture capital.

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by Olga Kostrova, CEO of IdeaMama Group | IdeaMama Ad Network | IdeaMamaClub.com |