3 ms·
The reason big companies have a huge advantage in the U.S is they get access to the jet stream of public market money that goes through highly regulated employe
by narrator 5y ago
The reason big companies have a huge advantage in the U.S is they get access to the jet stream of public market money that goes through highly regulated employee pensions and 401ks to Vanguard and Blackrock and then to the companies in public stock market indexes. The companies that form the stock market indexes get that money for very very cheap relative to small companies who have to find investors one by one or, outside of venture backed tech, take loans at high interest rates.
If someone can run a profitable business when money is hard to come by as a non-public company, it makes sense for a public company to buy them because they can get money much more easily and expand the smaller company's operations and make an even bigger profit. They can even run the company poorly and still make money because their money is cheaper.
Essentially, it's an information and regulation problem.
The best thing yet invented, taxwise, to counteract this advantage that big businesses have in attracting money is Qualified Small Business Stock (QSBS)[1]. It' a great tax incentive program because it massively rewards people for investing in startups. It is highly targeted to encourage that and not be a general loophole.
[1]https://www.sba.gov/blog/qualified-small-business-stock-what-it-how-use-it https://www.sba.gov/blog/qualified-small-business-stock-what...