Decius wrote:
] ] The net fund-raising total of $1.9 billion represented
] ] the smallest inflow of venture capital since $1.6 billion
] ] entered the industry in 1981.
]
] Now, adjust this for inflation...

this article is frightening.

We've returned more than 50% of the capital we've raised over the last 5 years. And while we still have a tremendous amount of money sitting around doing nothing, it's not going to go to a startup. It's going to go to existing investments who are on life support and need it until an exit appears. Which could be never at this rate.

Add to this the fact that Bush's idea of a stimulus package is to chop the taxes on dividends, so that people will invest in petroleum producers and steel plants instead of startups and technology companies, and we've basically eradicated all the entrepreneurial momentum created over the last 10 years.

I hate to sound over-reactionary, but that's really going to fuck up our future.

flynn23 wrote:
] Add to this the fact that Bush's idea of a stimulus package is
] to chop the taxes on dividends, so that people will invest in
] petroleum producers and steel plants instead of startups and
] technology companies, and we've basically eradicated all the
] entrepreneurial momentum created over the last 10 years.

So, here is an unresearched counterpoint. One of the problems with VC is the need for an exit strategy... an IPO usually... People in the company are incented to take their company thought the exit strategy, but no further. A lot of companies fizzled after going public because all the good people cashed out. Furthermore, many companies were designed to make good IPOs rather then good overall businesses. The market is irrational and will buy a well sung story.

Paying VC though dividends would be a more realistic way to build strong companies, because the investors are paid with profits rather then with more investors. In this light, a dividend tax cut would be helpful to the startup world to the extent that it incented people to move in this direction.

Of course, no one is talking about this direction.

Decius wrote:
] flynn23 wrote:
] ] Add to this the fact that Bush's idea of a stimulus package
] is
] ] to chop the taxes on dividends, so that people will invest
] in
] ] petroleum producers and steel plants instead of startups and
]
] ] technology companies, and we've basically eradicated all the
]
] ] entrepreneurial momentum created over the last 10 years.
]
] So, here is an unresearched counterpoint. One of the problems
] with VC is the need for an exit strategy... an IPO usually...
] People in the company are incented to take their company
] thought the exit strategy, but no further. A lot of companies
] fizzled after going public because all the good people cashed
] out. Furthermore, many companies were designed to make good
] IPOs rather then good overall businesses. The market is
] irrational and will buy a well sung story.

you are incented past the IPO! It's called a lock up agreement and every company going public has one. Add to that long term (4 year typically) vestment schedules, and you can see where this goes. Besides, until 96, the idea of cashing out at the IPO was ludicrous. Even now, most companies that go public don't realize their apex value until long after the IPO (witness Ebay).

] Paying VC though dividends would be a more realistic way to
] build strong companies, because the investors are paid with
] profits rather then with more investors. In this light, a
] dividend tax cut would be helpful to the startup world to the
] extent that it incented people to move in this direction.

Unfortunetly what a tax cut on dividends says more loudly is that we don't have any startups (nay, even growth stocks) worth investing in so we might as well put our money in mature, old economy companies that kick off dividends. Just like the kind my grandmother invests in.

When Microsoft announced that they were going to issue a dividend, it was a sad day. Love them or hate them, the day that Gates and Ballmer can't find something better to spend their money on other than giving it back to you is a sad one. So instead of reinvesting those massive profits on new products, services, and monopolies... we'll just give some back after awhile. The wheels of progress have seized up it seems.