A new law passed by the US Congress in August could make it more difficult for investors in certain countries to invest in venture-backed US technology companies or US venture capital funds, threatening an increasingly large and important source of capital for fledgling biotechs. The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) increases the powers of a small government agency housed in the Treasury Department charged with assessing the national security risk posed by takeovers of US companies. Under the new act, this agency, called the Committee on Foreign Investment in the United States (CFIUS), gains further powers beyond reviewing takeovers: now it has the power to review any investments even when those aren't taking a controlling stake. These new rules apply to areas deemed to be “critical technologies,” “critical infrastructure” or “sensitive personal data of US citizens,” according to the Act.
News of the reform has largely flown under the biotech industry's radar, but some are paying close attention. “CFIUS is one of the most powerful committees in the US government that you've never heard of,” says Third Rock Ventures partner Alexis Borisy. Increasing its remit is in line with current national priorities, says Borisy, who wears a second hat as the chairman of the National Venture Capital Association (NVCA), adding: “People want fair trade, and people want protection of our national assets” and our intellectual property. But although the goals of FIRRMA are laudable, the implementation of the law could conflict with other national interests. The US wants to attract the capital of the world to invest in and create groundbreaking companies, Borisy argues, and “we also want the best and brightest people in the world to come to the US and help build those groundbreaking companies.”
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