Contact: Jeanne Metzger, 703-524-2549 ext. 116

President of the National Venture Capital Association Testifies Before House Capital Markets Subcommittee In Support of Stock Option Accounting Reform Act (HR 3574)

Heesen Looks to Congress to Address Entrepreneurs’ Issues that FASB has Ignored

March 3, 2004 – Washington, DC - Mark Heesen, President of the National Venture Capital Association (NVCA), testified today before the House Capital Markets Subcommittee in support of HR 3574, The Stock Option Accounting Reform Act of 2003. Although the venture capital community and many in the business community continue to oppose mandatory expensing of employee stock options, HR 3574 mitigates to a considerable degree the critical flaws surrounding the impact of expensing employee stock options on small and emerging growth businesses.

In his testimony, Mr. Heesen pointed out that FASB has made no meaningful progress towards making any distinction between the effects of its proposal on large publicly traded entities vs. small private businesses, despite countless calls to do so and promises from FASB’s Chairman to members of the House Capital Markets Subcommittee that it would be done. Mandatory expensing of employee stock options will place a serious burden on small companies so that most will be forced to curtail their broad-based option programs. Aside from inaccurate financials, FASB’s call for expensing will have a significant long-term impact on growth oriented small businesses including distracting management, raising expenses, lengthening the reliance on expensive, risk equity capital and delaying sustained profitability which is necessary for an IPO or to become an attractive acquisition target.

In Mr. Heesen’s testimony, he asserted, “Should the FASB move forward with its current stock option accounting mandate, companies will have inaccurate financial statements, prepared at significantly greater cost. Entrepreneurial businesses will be unduly impacted, as they do not have adequate resources to comply. The entrepreneurial energy that now accounts for over 10% of the U.S. economy will be drained at a time when our global competitiveness is increasingly challenged by growing economies overseas.”

HR 3574 calls for stock option expensing of the top five executives of a company, exempts small businesses until three years after going public, and calls on the Secretaries of Labor and Commerce to complete an impact study of stock option expensing on the US economy.

For a copy of Mr. Heesen’s testimony, please contact Jeanne Metzger at (703) 524-2549.

The National Venture Capital Association (NVCA) represents approximately 450 venture capital and private equity organizations. NVCA's mission is to foster the understanding of the importance of venture capital to the vitality of the U.S. and global economies, to stimulate the flow of equity capital to emerging growth companies by representing the public policy interests of the venture capital and private equity communities at all levels of government, to maintain high professional standards, facilitate networking opportunities and to provide research data and professional development for its members.