Recently named Chair-Elect of the NVCA, Clarevia Ventures’ Founding Partner reflects on venture capital, public policy, and the importance of having a Midwest voice at the national table.

Venture capital has helped shape some of the most important companies in the American economy. Yet for all its impact, the industry is still widely misunderstood.

That disconnect is one reason Clarevia Ventures Founding Partner John Neis has spent decades engaging on public policy. In his view, venture capital is not just about financing companies. It is about creating the conditions that allow innovation to happen. Good policy can help new companies flourish. Well-intended policy, when it misses the nuances of how venture works, can create obstacles that slow innovation down.

John was recently named Chair-Elect of the National Venture Capital Association (NVCA), the leading trade association representing the U.S. venture capital industry. The role gives him a national platform to continue work he has long cared about: helping policymakers understand why venture capital matters, how venture-backed companies have an enormous impact on the economy, and why regions like the Midwest deserve a stronger voice in national policy conversations.

In this Q&A, John discusses what people still get wrong about venture capital, why it can be hard for policymakers to advocate for “what could be,” how the fine print of legislation can determine whether policy actually works, and why investors and entrepreneurs across the Midwest should know that their voices can help shape better policy.

You’ve been involved with the NVCA for several years, and you’ll now serve as Chair-Elect before becoming Board Chair next year. What does this role mean to you personally at this point in your career?

JN: Well, I’m obviously honored to be chosen to serve in the role. The organization does a lot on behalf of our industry, and for them to have confidence in me to represent their interests—and at times serve as a spokesperson on behalf of the industry—is an honor.

The industry has been very good to me, and I’ve always felt that policy has a huge impact on our industry. I’ve always tried to be engaged in public policy, and this is a great opportunity to use all of my experience to benefit the industry and help move it forward for the next generation.

You’ve spent decades making the case that venture capital is not just about financing companies, but about building the conditions that allow innovation to happen. How has your view of the relationship between venture capital and public policy evolved over time?

JN: I’ve always felt that venture capital was a really important factor in driving economic growth, and I felt it was important for policymakers to understand that.

Policymakers have opportunities to put policies in place that can be very supportive and help the industry flourish. They can also put policies in place that create obstacles and really undermine it. Sometimes those obstacles come from well-intended language, where policymakers just don’t understand some of the nuances of the industry.

So I feel it’s incumbent on us to take the time to talk to policymakers and make sure they understand both the intended consequences and the unintended consequences of legislation they may consider.

You were engaging policymakers in Wisconsin on the importance of venture capital as far back as the early 1990s. What did people misunderstand about venture capital then, and what do you think they still misunderstand today?

JN: I think there are a lot of things that were misunderstood then and are still misunderstood now.

If you go back to when I first started having conversations with policymakers in the early 1990s, candidly, some people didn’t even know what venture capital was. The industry really started to grow significantly in the mid-1980s, so it was still relatively new, and it had grown on the coasts first. There wasn’t a lot of it in Wisconsin.

My initial policy discussions were with policymakers here in the state, and I wanted to help them understand the potential impact. Less than 0.1% of new businesses receive VC funding, but those that do get it account for a disproportionate share of total economic value. In the US, public companies that were VC-backed before their IPO now constitute 42% of total public company market capitalization and 64% of all public company R&D spending, including 94% of R&D spending among public companies founded in the past 50 years. So you end up with a relative handful of extraordinary, growing companies that have an enormous impact on overall economic growth.  If states want to participate in the economy of the future, the entrepreneurs and innovators in their states need access to venture capital to compete internationally and produce that growth.

I think sometimes those are challenging conversations to have with policymakers because, understandably, they’re often most interested in the incumbents—the larger companies that have already created thousands of jobs. That’s a lot of voters. That’s a strong presence and there is an understandable desire to protect what you have. It becomes harder to advocate for what could be, what is not here today, and why that matters. But those mature companies are growing at the rate of the overall economy or less.  Yet, if you look at the aggregate long term data and can think strategically beyond a two year election cycle, the importance to a state’s long term economic health is obvious.  These things don’t have to be mutually exclusive.  States can focus on retention and growth, but the efforts in both need to be bold enough in both areas to be impactful

Where things have changed today is that pretty much everybody knows what venture capital is. But I think people still have a very distorted view of what the industry looks like. It’s extraordinarily diverse.

If you ask the average person—even people who are actively engaged in the ecosystem—what the median size fund is, people tend to guess $150 million or $250 million. The median size fund is $25 million. It’s tiny. And if you look around Wisconsin, that becomes more evident. We have a lot of very small funds in this state.

I think the general perception among much of the public is that venture capitalists are all managing hundreds of millions, if not billions, of dollars, and that we are all extraordinarily wealthy people—that many of us are billionaires. It’s just not true. There are a handful of people in this industry who achieve that level of success, but it is not representative of the industry as a whole.

It’s important that policymakers understand that, particularly outside of California, Massachusetts, and New York, where the big funds tend to be concentrated—especially in California. They need to know that there are active venture capitalists in their state. Small fund economics are tough, most people take a cut in pay to enter business and form a fund, and the time to a pay off for the risk is long.  They may start out tiny, but people are attracted to the business because of the opportunity to have an impact, and the long term dream of being bigger and have an impact at scale.

We need policies that encourage people to enter the business, to help them raise capital, and to create supportive ecosystems where their portfolio companies can succeed.

Why does Midwest representation matter at the national venture capital policy table? What perspective do investors and entrepreneurs from this region bring that may be different from the coastal venture hubs?

JN: It is no surprise that California, Massachusetts and New York became the epicenters of venture capital activity.  They are large population centers, they have a cluster of top tier research universities at the forefront of science, they are industrial hubs with commercial talent, and they are major financial centers.  All the necessary ingredients are comingling there and seeing opportunity together.  In the rest of the country, our great land grant universities were formed when we were an agrarian society and are often located away from our biggest cities and financial centers.  We have a density challenge that requires an effort to overcome.  

We are fortunate as a nation for the economic impact of those three coastal hubs.  But the geographic distribution of leading edge science and innovation is not as concentrated.  There are top tier research universities spread across the country.  The disparity in capital availability is not in our national interest.  Deciding to moving to one of these crowded hubs where the cost of living and doing business is extraordinarily high shouldn’t have to be the default option for entrepreneurs with really big ideas to attract capital.  We need policies that encourage capital formation in the rest of the country to democratize access to opportunity for entrepreneurs.

We also need policies that encourage regional cooperation.  If you’re in California, that’s the world.  Compare that to the Great Lakes region of Ohio, Michigan, Indiana, Illinois, Wisconsin, and Minnesota where we have our offices. They have a population of 39 million, we have 52 million. Both have five universities with more than $1 billion in annual research spending.  Clarevia is focused on healthcare, and the assets and capabilities in the Great Lakes region are extraordinary.  In digital health, the biggest player—Epic Systems—is right here in our backyard. There are significant digital health companies all throughout the region. If you look at medical devices, Minneapolis is the medical device capital of the country. Milwaukee has GE HealthCare. The orthopedic implant industry is anchored in and around Warsaw, Indiana, of all places.  Yet we are seriously lagging in funding availability in the region.

California is a region by itself, able to adopt policies to help the entire region.  We are six states that all operate in their own self interest, sometimes to the detriment of the region as a whole.  We should be competing against the rest of the world, not each other in a zero sum game.

Because of the concentration of the industry on the coasts, it would be easy for policymakers in our region to dismiss the ideas put forward by our industry as a coastal matter, not important to our region.  That is problematic because every time I check, California, Massachusetts, and New York still only have six senators. Having somebody from the other 47 states who’s willing to go to the Hill to make sure policymakers understand that venture capital is relevant to their constituents and the economic future of their states is really important.  They need to think about how they can encourage regional cooperation, capital formation and entrepreneurship across this country.

Healthcare and life sciences investing often requires a particularly long view, given the regulatory, clinical, reimbursement, and adoption hurdles involved. How does that experience shape the way you think about policy priorities for the broader venture industry?

JN: In these roles, I need to be focused on policy across the board and understand each sector’s particular concerns.

But I will say that healthcare brings a lot of those issues into focus. Because of the long path, because it impacts everybody’s lives, because of concerns around high costs—and yet, at the same time, the desire for new cures for diseases that are poorly addressed today—there are just a tremendous number of policy issues that come up around healthcare. That includes everything from the FDA regulatory approval process to reimbursement to university research funding, where a lot of this work starts, including NSF and NIH funding. There is a lot that can be improved.

There is a shared interest between VCs, who are trying to catalyze change, and members of Congress and citizens at large, who want better, cheaper solutions. We need to work together to create a policy environment where capital is attracted into the space to develop better cures and treatments—and to find ways to get those treatments to patients sooner without compromising safety or efficacy.

At the end of the day, this is about having an impact on people’s lives. People with illnesses don’t have the same patience that everybody else does.

You’ve built a reputation for understanding the fine print of policy—the details, amendments, and unintended consequences that can shape whether legislation actually works. Can you share an example from your career that illustrates why those details matter?

JN: I’ll give you one example on a statewide basis. Wisconsin adopted the Qualified New Business tax credits, a 25% tax credit for investing in early stage Wisconsin companies.  The legislative intent was to tilt the risk and return playing field so more investors would invest in early stage Wisconsin companies instead of elsewhere or in other asset classes.  As is typically the case, the law has one level of detail, and then the administering agency has to establish rules around the legislation that govern the details not explicitly covered by the law. There’s a ton of nuance in that.

When I saw the legislation, it was promising, but I was concerned that poorly considered rules could render the legislation completely ineffective.

One simple question was key. Was the tax credit granted to the fund that made the investment, making it an asset of the fund, or was it just a pass through benefit that just flowed through to the Wisconsin taxpaying investors?  If the answer was the latter, it would completely undermine the legislative intent.

A lot of the investors in the venture capital asset class are tax-exempt. You have pension funds, foundations, and endowments. They represent about 50% to 55% of the capital overall in the industry. So what is a tax credit going to do for them?  The same is true for taxpaying investors based outside Wisconsin.

Further, if you have a tax credit that benefits some of your investors but not others, your obligation—really, your fiduciary duty—is to ignore the tax treatment of the different parties and invest for the best rate of return. But that would undermine the whole incentive of the Act 255 credits.

The intent was to augment returns, make investments more attractive, and encourage people to invest in Wisconsin earlier—to invest in this state versus other places. It was necessary to explain that it needed to be an asset of the fund where the benefit to be shared equally among all investors.  We could achieve that by giving the credits to taxpayers and an offsetting allocation of gains to the other investors, so everybody would benefit equally.

We persuaded the then-Secretary of Revenue that, yes, this was a fund asset, and that approach made absolute sense in order to achieve the legislative intent.  

Once that was done, the next improvement to the law was straightforward: just make these credits sellable. That facilitated the sharing of the benefit with everybody. It also meant that not only tax-exempt investors, but also out-of-state investors, could be inspired to invest in Wisconsin because of the attractiveness of the credits.

At the end of the day, this is not about benefiting the taxpayers. It’s about making capital available for entrepreneurs. Once everybody realized that, they made the necessary changes to make it possible. So understanding the nuance of the law and how it was going to be administered, and the obligations fund managers have to all of their investors was absolutely critical to allowing it to be successful.

As you look ahead to your term as NVCA Chair, what are the issues you believe the venture industry most needs to help policymakers understand?

JN: We have a couple of key issues right now. There are big changes happening in the industry. There is a growing concentration of capital in very large funds, and going public is very difficult these days—very different from what it was 25 years ago. In fact, there are half as many public companies today as there were 25 years ago. It has dropped from about 8,000 to about 4,000.

The venture capital finance world has adapted. The stage at which companies would have gone public back in, say, 2000, is now being financed by late-stage capital from very large funds to fuel growth to the next stage. But that does not provide liquidity for investors, and it can be challenging for early-stage investors who play a very key role early in a company’s life.

As a company’s financing needs expand, early-stage investors may have limited capacity to continue investing. With some of these later-stage financings, they can get pushed off the board and no longer have the same kind of voice. Many of those investors would love to have a chance for liquidity and, in doing so, go back, raise another fund, and invest in young companies at the early stages where their skills are best applied.

So there are a few things I think are important.

First, I do believe we could improve the climate for companies to go public. It has gotten prohibitively expensive. The size of the filings has gotten enormous. We’ve had everything from Sarbanes-Oxley to provisions under Dodd-Frank Financial Reform Act, and all of these have increased filing requirements, generally with the intent of greater transparency and greater disclosure to investors.

But it has gotten so big, and some of those disclosures have gotten so complex, that the average person can’t even read them. The cost of preparing all of that has become extraordinary. The cost of going public is prohibitive, especially for a company with a small market cap.

I think we need to examine which requirements actually provide investor protection, and which are just burdensome and not really impactful, and try to lighten the burden on young companies that are trying to reach the public markets.

Second, secondary transactions are growing tremendously as a path for exit, but the regulatory framework is not keeping up with the change in the market. I think there are a lot of things that could be done to increase the availability of secondary transactions and broaden participation in secondary transactions. Passage of the DEAL Act would be a good first step.  We have had productive conversations with SEC Chairman Paul Atkins and good dialogue on this, but it does need to be improved.

In healthcare, there are also a lot of discussions to be had around things like reimbursement. The average person out there thinks it is all about getting FDA clearance, and then you go sell your product. That is only half the job. You have to get paid for it.

The job of the FDA is to determine that something is safe and effective. The job of CMS is to determine that it is reasonable and necessary. The FDA path is relatively straightforward and understandable in terms of what you need to do to get clearance. The reimbursement pathway is much more challenging and can take an extraordinarily long period of time.

So you have products that are approved, safe, and effective, and yet it takes a long time before they can get paid. That can result in companies needing a lot more cash to bridge that gap. In fact, it can kill companies because they cannot get through that gauntlet fast enough.

Of course, AI is also on everybody’s radar.  We believe that Congress should pass legislation for federal preemption, just as they have done for the FDA.  Can you imagine if every state had its own regulatory agency for drug development?  The patchwork quilt of regulation would drive up costs and stifle innovation.  One national agency has the resources to do a better job of setting standards for safety, testing requirements, and use.  Same is true for AI.  We will undermine our competitiveness without national standards.  That is not to say there is no role for states and communities.  As in the case of a pharmaceutical plant or any other industrial facility, they should be able to use zoning for facilities like data centers, water usage, and energy consumption.  This is not unprecedented and unique to this industry.  Kohler Company, the 150 year old manufacturer of plumbing fixtures once used an enormous percentage of energy from local utilities to power their furnaces before transforming to renewable sources in 2019.  The division between federal and state jurisdiction has to start with Congress asserting its power for federal preemption.  They need to get past the politics of AI and focus on common sense policy.

Clarevia has been investing in innovation from the Midwest for more than 40 years. What does it mean for the firm to have its founding partner step into this national leadership role?

JN: Again, it’s an honor. We’ve been rolling up our sleeves and being vocal on the policy front for more than 30 years. I’ve had this long tenure on the Wisconsin Technology Council now for 26 years. I testified before Congress on behalf of the NVCA in 2007, and we’ve participated in the VCs to DC fly-ins to lobby on behalf of the industry.

To me, it’s great for a couple of reasons. First, I’m at a point in my career where I’ve accumulated a lot of knowledge and experience, both about our industry and about how government works. Having that knowledge of history is extraordinarily helpful.

As I’ve handed off the leadership of the firm, it has also freed up a little more time for me. So I’m at a point where I can dedicate the attention to try to give back to the industry, so others can benefit.

To me, it’s an honor, and it’s also an opportunity to show my appreciation for—and belief in—what this industry does and the kind of impact it has on people’s lives.

For founders, investors, and policymakers in Wisconsin and across the Midwest, what do you hope this moment signals about the role this region can play in the future of innovation in the US?

JN: I do think it’s important for funds all over the country to realize that the NVCA is a place where they have a welcomed voice. They will be heard.

Sometimes there is an impression that the NVCA is for the big mega funds that are controlling all the policy direction, and that it isn’t a place for smaller funds. Nothing could be further from the truth.

We’re a small industry, and participation in the NVCA could be higher. Inevitably, you get free riders—firms who don’t join, but of course share in the benefit of all the work the organization provides. But most importantly, I want people to recognize that if they participate, their voice will be heard, and they too can help influence good policy.

It can feel overwhelming in D.C. right now. We all hear about big-money interests, and we all hear about where the influence is, so it is easy to feel like you can’t possibly have a voice.

But at the end of the day, our industry has a huge impact on the economy, and the people in D.C. understand that. We have compelling stories about how our companies have changed people’s lives, and that resonates in D.C. It’s a human thing to hear the stories of companies that are impacting people’s health, impacting local economies, creating great jobs, and solving problems in the world.

My hope is that more companies and funds in the Midwest choose to engage and be a part of that conversation, and that I can effectively communicate to national policymakers that this industry is important to the region—and that we need their help to make this region thrive.