Latest news with #QualifiedSmallBusinessStock
Technical.ly
18-07-2025
- Business
- Technical.ly
VC slowdown continues as Philly startup funding hits a five-year low
Venture capital went down in Philly again last quarter, falling to its lowest levels since 2020. Companies in the Philadelphia region raised $394.4 million across 83 deals in Q2 2025, according to the latest Venture Monitor report, released quarterly by PitchBook and the National Venture Capital Association (NVCA). That's down again from last quarter, when startups in the region raised $750 million across 114 deals. The Q1 results had already disappointed investors who were optimistic heading into 2025. This is the lowest quarter for VC activity since Q1 2020, when the region raised $333 million over 100 deals. These numbers aren't surprising given the economic and policy uncertainty this year, especially in Q2, Dean Miller, president and CEO of the Philadelphia Alliance for Capital and Technologies, told 'Investors are very gun-shy to invest in companies that have any kind of exposure to the risks,' he said. Plus, companies are waiting to see whether they'll be impacted by potential policy changes like tariffs. Usually, Q2 is a 'catch-up quarter' from Q1, according to Howard Lubert, regional president of Keiretsu Forum Mid-Atlantic. The April to June period tends to be stronger because delayed deals at the end of the previous year finally close, making the Q2 2025 numbers seem especially low. This year's deal count shows that new deals aren't making it through due diligence and existing deals are falling through, he said. 'It's a sign that investor hesitancy isn't letting up,' Lubert said. 'Founders are facing a capital environment that remains unforgiving.' How the 'Big Beautiful Bill' shaped the market Policy changes are also influencing the investment climate. The only sectors seeing big gains are those prioritized by the Trump administration, like defensetech and artificial intelligence, according to the report. Even then, most of that money went to a handful of companies, none of them in Philly. 'This all underscores the importance of forward-looking public policy,' said Bobby Franklin, president and CEO at NVCA. 'The recently enacted One Big Beautiful Bill Act delivers significant wins for founders and investors … However, the bill also introduces new complexities.' An expansion on Qualified Small Business Stock (QSBS) rules, a tax benefit for shareholders of qualified small businesses, could lead to more restructured deals aiming to support firms' existing portfolio companies, according to Lubert. But lean companies with short return-on-investment timelines will still take priority, he added. The new legislation also ensures permanent research and development expensing. Companies can deduct the costs of domestic research and development from taxable income in the year those costs are incurred, which will hopefully increase cash flow for companies, Miller said. There are new challenges, too. Changes to university endowment taxes mean the institutions with large endowments will face higher tax rates on their investments. The act also outlines plans to decrease investment in clean energy and transportation innovations. ' The Big Bill offers long-term benefits,' Lubert said. 'But those advantages only matter if strong companies are emerging and exits are possible.' There's still hope for a rebound Despite these low numbers, Philly's challenges are not unique and its diverse economy positions it for recovery, according to Miller. Philadelphia is home to a variety of strong industries, meaning it won't rely on just one sector to recover from these challenges, he said. Plus, Philadelphia is a top ecosystem for early-stage companies, which don't rely on venture capital to grow, and challenging times often lead to more new startups, according to Miller. For later-stage founders, hope is not lost, though. Generally, the region is still raising more than it was ten years ago. The best founders are still working towards raising money and the best companies with the best teams will succeed, he said. For example, Sojo Industries raised $40 million and Fore Biotherapeutics raised $38 million last quarter, both of which were among the region's top 5 deals. 'I'm a big believer in 'raising customers,'' Miller said. 'So focusing on your business, your product, your go-to-market, and most importantly, your attraction of customers, is mission critical in these types of environments.'
Miami Herald
15-07-2025
- Business
- Miami Herald
How the 'Big Beautiful Bill' boosts QSBS benefits for startup employees and founders
How the "Big Beautiful Bill" boosts QSBS benefits for startup employees and founders QSBS benefits got an update in Trump's new budget law. Range shares how that could impact startup founders, investors, and employees. The new GOP budget legislation includes a massive win for startup employees and founders: dramatically expanded Qualified Small Business Stock (QSBS) benefits that could save qualifying investors from paying 28% capital gains taxes on millions of dollars in returns. The changes increase the maximum tax exclusion from $10 million to $15 million while allowing partial benefits after just three years instead of the current five-year minimum. For the tech sector specifically, this represents the most significant expansion of startup investment incentives in over a decade. The Joint Committee on Taxation estimates these changes will provide an additional $17.2 billion in tax benefits over the next decade. What Changes with QSBS Under the GOP Tax and Spending Package The GOP budget legislation restructures Qualified Small Business Stock benefits in three key ways: Reduced Holding Period with Tiered Benefits: Previously, you had to hold QSBS for five years to get any tax exclusion. The new rules create a graduated schedule: 50% exclusion after 3 years (effective tax rate: 14%)75% exclusion after 4 years (effective tax rate: 7%)100% exclusion after 5+ years (tax-free) Higher Exclusion Limits: The maximum tax-free gain increases from $10 million to $15 million (or 10 times your investment, whichever is higher). Both limits will be indexed for inflation starting in 2027. Raises the Maximum Gross Asset Threshold For Companies: The gross asset threshold rises from $50 million to $75 million, meaning more mature startups remain QSBS-eligible longer. How These Changes Amplify the QSBS Tax Exemption The expanded QSBS rules create three fundamental improvements that benefit anyone holding qualifying startup equity: More Companies Qualify for Tax Exclusion The gross asset threshold increase from $50 million to $75 million means companies can maintain QSBS eligibility deeper into their growth cycles. This expansion particularly helps employees at Series B and C companies who previously lost qualification and extends the window for later-stage hires to capture these benefits. Earlier Exit Flexibility with Meaningful Tax Savings The tiered approach transforms QSBS from an all-or-nothing proposition into a graduated benefit system. Rather than losing all tax advantages if you sell before five years, you could capture a 50% exclusion after three years and 75% after four years. This change removes the penalty for circumstances beyond your control, like acquisitions or liquidity needs. Substantially Higher Tax-Free Gains The exclusion cap jumping from $10 million to $15 million means 50% more capital gains could be sheltered from taxes. For high-growth companies where individual equity stakes can reach eight or nine figures, this expansion captures significantly more wealth preservation. Who Might Benefit Most from These Changes These changes can particularly impact several key groups: Serial Entrepreneurs and Angel Investors gain the flexibility to recycle capital between ventures without waiting for arbitrary holding periods, while still capturing substantial tax Employees with Stock Options face less pressure around exercise timing, knowing they'll receive meaningful tax advantages even if their company exits before the traditional five-year Capital and Private Equity professionals can optimize portfolio exits around business fundamentals rather than tax calendars, while still preserving significant tax advantages for their investments. Real-World Example: Million-Dollar Tax Savings Consider this scenario: You exercise $100,000 worth of startup options that grow to $5 million over four years, then your company gets acquired. Under Previous Rules: You'd pay the full 28% QSBS rate on all gains (about $1.37 million in taxes) because you didn't hit the five-year threshold. Under New Rules: You'd get 75% exclusion after four years, paying taxes on only 25% of gains (about $343,000 in taxes)-saving over $1 million. Keeping an Eye on Evolving Tax Legislation With the "Big Beautiful Bill" signed into law, the new exemption structure applies only to QSBS acquired after the enactment date, making timing important for current equity holders considering exercise decisions. This expansion comes at a particularly relevant moment for the tech sector. As artificial intelligence and other emerging technologies drive new startup formation, the enhanced QSBS benefits create stronger incentives for both founding teams and early employees to take entrepreneurial risks. The proposed changes acknowledge that the original $10 million and $50 million thresholds, established in the early 1990s, no longer reflect today's startup economics. This is just one example of how tax policy and financial regulations are constantly in flux. That's one of the reasons why it can be easy to miss out on new wealth strategy opportunities as they emerge. The expanded QSBS tax exemption doesn't require new risk-taking or complex restructuring to make startup equity positions more valuable from a tax perspective, as long as investors know how to time option exercising and stock sales to take advantage of the exclusion. This story was produced by Range and reviewed and distributed by Stacker. © Stacker Media, LLC.
Wall Street Journal
14-07-2025
- Business
- Wall Street Journal
Trump's Tax Law Sweetens Secondary Deals in Venture Capital
Tucked into the 'big beautiful bill' signed by President Trump is a new incentive for shareholders of venture-backed startups to sell their shares on what is known as the secondary market. Investors don't expect the change to trigger a stampede of sellers, but they say cashing out earlier is now a bit easier. The new tax-and-spend law expands the Qualified Small Business Stock tax exclusion to allow investors in startups to sell more of their holdings early without paying capital-gains taxes. The new bill raises the per-issuer cap on eligible gains to $15 million, from $10 million, allowing investors to reap the benefits while holding shares for shorter periods.
Yahoo
08-07-2025
- Business
- Yahoo
The fireworks between D.C. and Silicon Valley are just starting
Happy Monday, Fortune Tech Editor Alexei Oreskovic here today, pinch-hitting for Leo. As Americans celebrated a long Independence Day weekend, they were treated to a few noteworthy displays of festivity and fireworks in the ever-fascinating relationship between Silicon Valley and Washington, D.C. On the festive side, venture investors and startup founders cheered a provision in the Trump tax and spending bill that broadens capital gains tax exemptions for stock sales at certain small businesses. The changes to the Qualified Small Business Stock program mean that owners and investors in a domestic 'C' corporation with assets up to $75 million (up from the previous $50 million threshold) will get more ways to take advantage of the benefit. A wealth planning advisor told CNBC that an investor could now put '$74.9 million into a small business and have up to $749 million exempt from capital gains if it sold for more than 10 times the original basis.' 'We're going to see a lot more founders / early employees selling secondary, but hopefully we see a lot more people wanting to join startups!' posted Menlo Ventures' Deedy Das. One entrepreneur who is not impressed: Elon Musk, who declared over the weekend that he is launching the America Party, a new political party to 'fight the Republican/Democrat uniparty' in the wake of the bill's passage through Congress. 'What the heck was the point of @DOGE if he's just going to increase the debt by $5 trillion??' Musk posted on Sunday. As expected, Trump responded with vitriol, calling Musk a 'TRAIN WRECK' who has gone 'off the rails.' It's unclear if Musk has yet taken any concrete steps to certify the America Party (as of Saturday evening no paperwork had been filed, according to the New York Times). But the real question is what kind of concrete retribution Trump could try to exact on his erstwhile political ally and campaign donor. Trump has previously threatened to cut federal contracts and subsidies to Musk's various businesses, which include SpaceX and Tesla (Tesla's stock often tracks the ups and downs of Musk's political fortunes), and has even mused about potentially having Musk deported. In short, this super-sized donnybrook does not seem likely to quiet down anytime soon. One more thing. Speaking of Trump and Silicon Valley, it's not secret that the President would like Apple to make iPhones on American soil. I highly recommend this piece by my colleague Verne Kopytoff, who looked at what happened the last time a major tech company (Google) tried to build smartphones in the U.S. Back to regular Term Sheet programming with Allie tomorrow, Alexei OreskovicX: @lexnfxEmail: a deal for the Term Sheet newsletter here. Allie Garfinkle curated the deals section of today's newsletter. This story was originally featured on
Business Times
27-06-2025
- Business
- Business Times
Wealthy Silicon Valley investors in line for US$17 billion windfall in US senate Republican tax Bill
[NEW YORK] Silicon Valley's favourite tax break may be getting an upgrade. Venture capitalists, along with successful tech founders and early startup employees, already pay no taxes on billions of US dollars of gains annually, thanks to a lucrative and complicated provision called Qualified Small Business Stock, or QSBS. Now the carve-out could get even more generous in changes included in Senate Republicans' proposed tax and spending Bill moving through Congress. The once-obscure provision is the subject of 'every dinner conversation in Silicon Valley,' said Christopher Karachale, a partner at law firm Hanson Bridgett in San Francisco. 'It's already an exceptional benefit for people who take risks on startups.' Taxpayers claimed US$51 billion of QSBS gains in 2021, a record year for venture capital deal activity, according to a Treasury paper earlier this year, with the benefits skewed to a select group. While about 33,000 people reported QSBS to the Internal Revenue Service annually over the decade studied by Treasury, 90 per cent of the total income went to individuals reporting more than US$1 million of gains on eligible stocks. Shares qualify as QSBS if they're acquired early enough in a startup's life cycle and held for more than five years. Once sold, capital gains aren't taxed up to certain limits, which advisers to the wealthy have figured out how to stretch and multiply several-fold. With the right planning, a venture capital investor or founder can end up with hundreds of millions of US dollars of tax-free income. Now the QSBS break could get even better. Though it was not addressed in previous versions of US President Donald Trump's 'One Big Beautiful Bill,' Senate Republicans slipped into their version tweaks relaxing its complex rules. Taxpayers would be able to invest at later stages in startups and still get QSBS, cash out earlier and still get a partial benefit, and skip taxes entirely on up to 50 per cent more of their windfalls. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 'I'm surprised' Critics say the QSBS provision is unnecessary and overly expensive. House Democrats proposed restricting the tax break in 2021. 'I'm surprised they're not killing this thing, but I guess the lobbyists did their work,' said Manoj Viswanathan, a professor at the University of California Law San Francisco who has studied QSBS. 'I just don't think it's worth it.' The Treasury projects the current QSBS break will cost the US$44.6 billion over the decade beginning in 2025. The Senate bill's proposed changes would boost that by another US$17.2 billion over that period, the Joint Committee on Taxation estimates. Defenders of the provision have spent several years pushing Congress to expand it, arguing it encourages innovation and risk-taking. 'It brings more capital off the bench and into the game that might otherwise go to different asset classes,' said Patrick Gouhin, chief executive officer of the Angel Capital Association. 'QSBS encourages long-term investment in high-growth startups across the country by lowering the cost of capital,' Bobby Franklin, president and CEO of the National Venture Capital Association, said in a statement. 'It tells investors and founders alike: building something new in America is still worth it.' Despite the name Qualified Small Business Stock, the vast majority of small businesses are not eligible. Only C-corporations issue stock that qualifies as QSBS. Service industries are generally excluded, and the break is most valuable for technology or biotech that can grow quickly and generate large capital gains. The Senate proposal would be a potential boon to investors in artificial intelligence and other hot areas. 'Stacking' strategy To qualify under current law, taxpayers must have obtained their shares in a C-corporation at an early stage, when it had less than US$50 million of gross assets, an accounting definition often significantly less than its valuation. People who hold QSBS for at least five years can avoid taxes on up to US$10 million of capital gains or 10 times their initial investment, whichever is more. An early investor who puts US$30 million into a startup, therefore, can theoretically receive US$300 million tax-free. Founders can maximise their initial basis, and thus their potential QSBS-eligible gains, by transferring intellectual property into a startup from a predecessor company. Through a process called 'stacking,' QSBS holders can multiply the benefits of the US$10 million exclusion as well. 'It's the biggest game in town,' Brian Gray, a partner at accounting firm Gursey Schneider in Los Angeles, said of the strategy. His clients typically set up six or seven trusts, each benefiting a different family member, to get up to US$60 million or US$70 million in tax-free gains rather than just US$10 million. Senate Republican lawmakers would turbo-charge those benefits. They would set a US$75 million limit on an eligible startup's gross assets, up from US$50 million, on QSBS issued after the bill is enacted. Maximum tax-free gains would jump to US$15 million, from US$10 million. Both limits would be adjusted for inflation starting in 2027. The bill would also make it easier for QSBS holders to exit their investments sooner than five years without forfeiting tax benefits, allowing them to exclude half their gain after three years and 75 per cent after four years. That will be valuable to serial entrepreneurs, according to Gouhin of the Angel Capital Association. 'This gives you an added incentive to turn that company as quickly as possible.' BLOOMBERG
