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Morning Brief: VC Fundraising Cools in Q1, but IPOs are Hot

by Renewing America Staff
April 10, 2012

Traders gather on the floor of the New York Stock Exchange for Demandware’s IPO on March 15, 2012. (Brendan McDermid/Courtesy Reuters) Traders gather on the floor of the New York Stock Exchange for Demandware’s IPO on March 15, 2012. (Brendan McDermid/Courtesy Reuters)

Thomson Reuters and the National Venture Capital Association announced that first quarter venture capital fundraising fell by 35 percent in 2012. This decline may mark the end of a rebound that appeared to begin in 2011; while the $18.8 billion raised in all of 2011 was still below 2008’s $25.3 billion, it was a sharp increase from 2010’s $13.8 billion. This news contrasts with improved exit opportunities; the 2012 initial public offering (IPO) market was the strongest for a first quarter since 2007.

Facebook Snaps Up Instagram

Facebook will acquire Instagram for $1 billion (Reuters). Instagram is only two years old with roughly a dozen employees and last year was valued at only $20 million, but its torrid growth attracted Facebook and social media rivals Twitter and Google. In a break with past behavior, Instagram will maintain a separate product rather than integrating within Facebook, following Google’s approach to YouTube (FT). ReutersRobert Cyran expresses concern that by acquiring this successful start-up rather than developing its own innovation, Facebook is relying on its large checkbook rather than engineering prowess to repel threats.

Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.

Education and Human Capital

Demand for Skilled-Worker Visas Rises

First week applications for H-1B visas doubled (WSJ) in 2012, potentially signaling an improving economy. The 25,600 petitions received since April 2 are for jobs starting October 1 or later. The H1-B program has a quota of 65,000 visas, with an additional 20,000 allotted to foreign national with advanced degrees. Applications are still slower than before the recession; in 2007 and 2008, the quota was reached in a few days.

This CFR Backgrounder provides an overview of the immigration policies proposed by President Obama and his potential Republican competitors. CFR’s 2009 Independent Task Force on U.S. Immigration Policy, chaired by Jeb Bush and Thomas F. McLarty III, recommends policies with three goals: reform of legal immigration to improve efficiency and U.S. competitiveness; effective enforcement of immigration laws; and a fair, humane, and orderly way to deal with migrants illegally living in the United States.

Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.

International Trade and Investment

Why the Dollar Era Continues

In the Harvard Business Review, Justin Fox discusses the persistence of the U.S. dollar as the world’s reserve currency. A country whose currency acts as the global reserve needs to maintain a current accounts deficit to enable the currency to circulate abroad, but the result is global trade imbalances that reduce confidence. The U.S. dollar had been declining in international currency markets since 2002, but the financial crisis and lack of a credible replacement reinforced its role, at least temporarily.

International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.

Corporate Regulation and Taxation

New Rules for Mortgage Servicers

Richard Cordray, the director of the Consumer Financial Protection Bureau (CFPB) is expected to announce new rules for mortgage servicers (WashPost). The rules proposed by the CFPB include warning borrowers before any interest rate adjustments, a limit of thirty days to investigate errors, and new options for delinquent borrowers to avoid foreclosure. Several of the eight proposals were required by the Dodd-Frank Act. After a review period, an official notice of the proposed rules will be released in the summer.

Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.

Steven J. Markovich holds an MBA from the University of Chicago’s Booth School of Business.

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