6 ms·

> No, it won’t have a 1 bil payout Does anything have a $1B payout for the founder? I guess there are a few companies that achieve this, but it takes only a mo

> No, it won’t have a 1 bil payout Does anything have a $1B payout for the founder? I guess there are a few companies that achieve this, but it takes only a modicum of humility to realize you're not likely to be one of the most successful founders this decade.

DaiPlusPlus 3y ago
Even if anyone gets a cool $1b, the IRS is going to come for a good chunk of that...
- choppaface 3y ago
  IRS takes less than 50%.
  - willcipriano 3y ago
    A lot of this confusion is people talking past eachother. For most people the level of governmental entity taxing them isn't the concern, its the amount of tax the government in general demands in particular contrasted with the level of service provided. Add up the IRS cut, state and local, gas tax, sales tax, fees to use services already paid for with taxes and are basically required for life in the US (road tolls, document fees, vehicle registration fees, public transit fares, etc), costs for compliance with laws like hiring someone to help you file taxes or taking a day off work to renew your driver's license, higher costs for goods and services due to monopolies granted by government (drug patents where the same drug costs a quarter of what it does in the US everywhere else the world, higher than otherwise internet fees paid to entities like Comcast who are granted monopolies, hospitals that are expensive due to monopolies granted by certificates of need, etc), inflation caused by money printing to pay for foreign wars without broad popular support, housing that is more expensive due to policies that benefit homeonwers at the expense of those without assets etc, etc. Its way more than half of your productivity that is taken, if you are productive and earn wages. Those earning capital gains are hit about half as hard, another happy little accident that benefits primarily the wealthy and powerful to add to my list above. Oh and the best part, after paying those taxes for decades once you get sick, all of the sudden, the government and the medical industrial complex doesn't have the money to help you. You get to live in a cardboard box under a overpass.
    - pc86 3y ago
      You're making a comment about people "talking past each other" and yet you're talking about gas tax and sales tax in relation to business acquisitions and venture capital payouts.
- gnicholas 3y ago
  Yep, although the qualified small business stock exemption comes in handy if/when that happens. You get to exempt a percentage of the gain of the sale of your stock, and if you roll over the gain into other QSBS (by investing in startups, for example), you can defer the non-exempted portion.
  - noduerme 3y ago
    Or just be like Peter Thiel and do all your angel investing through your Roth IRA... https://www.propublica.org/article/lord-of-the-roths-how-tech-mogul-peter-thiel-turned-a-retirement-account-for-the-middle-class-into-a-5-billion-dollar-tax-free-piggy-bank https://www.propublica.org/article/lord-of-the-roths-how-tec...
    - navane 3y ago
      He bought gambling stock with his retirement fund, struck gold, and now has 5bn untaxed in a US account?
      - vitus 3y ago
        He bought 1.7 million founders' shares of Paypal (then Confinity, which he cofounded and was CEO of at the time) for under $2000. These are terms you would never offer to an investor, that you'd never offer to an employee. For comparison, the SEC filing for Paypal's IPO has Thiel Capital investing a bridge loan of $100k in 1998 which was then converted into 500 thousand shares (100x higher valuation than his individual "purchase" the following month). https://www.sec.gov/Archives/edgar/data/1103415/000091205702023923/a2082068zs-1.htm https://www.sec.gov/Archives/edgar/data/1103415/000091205702... From the ProPublica article, re: why this was problematic: > Thiel’s unusual stock purchase risked running afoul of rules designed to prevent IRAs from becoming illegal tax shelters. Investors aren’t allowed to buy assets for less than their true value through an IRA. The practice is sometimes known as “stuffing” because it gets around the strict limits imposed by Congress on how much money can be put in a Roth.
        3y ago
- baq 3y ago
  If you’re paying taxes, you’re winning.
  - rapidaneurism 3y ago
    If you're paying taxes you should change your accountant
    - SJMG 3y ago
      Yes, if you're paying taxes you should engage a wealth management team that knows about collaterialized loans.
  - dspillett 3y ago
    If you are making more than enough to pay a significant amount of tax, but get away with paying a derisory amount or even nothing, then you are really winning!
- generic92034 3y ago
  Well, I for one could live with that... :)
- coldtea 3y ago
  Oh, the humanity! A founder in that situation is going to just get > 500million, not the full billion! How would they be able to afford food? Also, aren't taxes on things like stocks, equity, etc far lesser than personal income taxes anyway?
dr_dshiv 3y ago
> modicum of humility = turnoff for investors. They only care for chances at homeruns — singles and doubles are not welcome. You’d better swing for the fences, because that’s the purpose of VC. (This is my understanding, not my endorsement. Please correct as needed)
- coldtea 3y ago
  >= turnoff for investors Given the situation described in TFA, that's just as well.
- hnbad 3y ago
  No, that seems about right. Traditionally investors prefer investing in a number of moonshots with the hopes that one of them succeeds to such an extreme that it pays for the losses on the rest. There are even some investors known to invest in direct competitors to hedge their bets. The question only seems to be whether this strategy still works in a higher interest rate environment. As I understand it this development mostly stems from it being more profitable to invest with a low ROI (or a low probability of a high ROI) than to keep the money in the bank.
- highwaylights 3y ago
  That’s the model essentially. Makes a lot of sense too. Anyone can get S&P 500 returns with little to no risk. That’s not to say they won’t lose money but it’ll be market returns either way, will be very liquid, and readily transparent to the holder. Given the risk involved in early stage investment the maths just don’t make sense for an investor to shoot for anything short of the moon. tldr; Seed funding / early stage investing is closer to lottery tickets and Vegas than to your 401k.
  - godzillabrennus 3y ago
    There are motivations beyond return. Alignment of capital with values to support a team/product/service that you believe will help in a manner you care about.
    - 3y ago
coldtea 3y ago
>Does anything have a $1B payout for the founder? Instagram perhaps? Also, an IPO?
zer00eyz 3y ago
>> Does anything have a $1B payout for the founder? WhatsApp likely did. Minecraft as well.

DaiPlusPlus 3y ago

Even if anyone gets a cool $1b, the IRS is going to come for a good chunk of that...

choppaface 3y ago
IRS takes less than 50%.
- willcipriano 3y ago
  A lot of this confusion is people talking past eachother. For most people the level of governmental entity taxing them isn't the concern, its the amount of tax the government in general demands in particular contrasted with the level of service provided. Add up the IRS cut, state and local, gas tax, sales tax, fees to use services already paid for with taxes and are basically required for life in the US (road tolls, document fees, vehicle registration fees, public transit fares, etc), costs for compliance with laws like hiring someone to help you file taxes or taking a day off work to renew your driver's license, higher costs for goods and services due to monopolies granted by government (drug patents where the same drug costs a quarter of what it does in the US everywhere else the world, higher than otherwise internet fees paid to entities like Comcast who are granted monopolies, hospitals that are expensive due to monopolies granted by certificates of need, etc), inflation caused by money printing to pay for foreign wars without broad popular support, housing that is more expensive due to policies that benefit homeonwers at the expense of those without assets etc, etc. Its way more than half of your productivity that is taken, if you are productive and earn wages. Those earning capital gains are hit about half as hard, another happy little accident that benefits primarily the wealthy and powerful to add to my list above. Oh and the best part, after paying those taxes for decades once you get sick, all of the sudden, the government and the medical industrial complex doesn't have the money to help you. You get to live in a cardboard box under a overpass.
  - pc86 3y ago
    You're making a comment about people "talking past each other" and yet you're talking about gas tax and sales tax in relation to business acquisitions and venture capital payouts.
gnicholas 3y ago
Yep, although the qualified small business stock exemption comes in handy if/when that happens. You get to exempt a percentage of the gain of the sale of your stock, and if you roll over the gain into other QSBS (by investing in startups, for example), you can defer the non-exempted portion.
- noduerme 3y ago
  Or just be like Peter Thiel and do all your angel investing through your Roth IRA... https://www.propublica.org/article/lord-of-the-roths-how-tech-mogul-peter-thiel-turned-a-retirement-account-for-the-middle-class-into-a-5-billion-dollar-tax-free-piggy-bank https://www.propublica.org/article/lord-of-the-roths-how-tec...
  - navane 3y ago
    He bought gambling stock with his retirement fund, struck gold, and now has 5bn untaxed in a US account?
    - vitus 3y ago
      He bought 1.7 million founders' shares of Paypal (then Confinity, which he cofounded and was CEO of at the time) for under $2000. These are terms you would never offer to an investor, that you'd never offer to an employee. For comparison, the SEC filing for Paypal's IPO has Thiel Capital investing a bridge loan of $100k in 1998 which was then converted into 500 thousand shares (100x higher valuation than his individual "purchase" the following month). https://www.sec.gov/Archives/edgar/data/1103415/000091205702023923/a2082068zs-1.htm https://www.sec.gov/Archives/edgar/data/1103415/000091205702... From the ProPublica article, re: why this was problematic: > Thiel’s unusual stock purchase risked running afoul of rules designed to prevent IRAs from becoming illegal tax shelters. Investors aren’t allowed to buy assets for less than their true value through an IRA. The practice is sometimes known as “stuffing” because it gets around the strict limits imposed by Congress on how much money can be put in a Roth.
      - 3y ago
baq 3y ago
If you’re paying taxes, you’re winning.
- rapidaneurism 3y ago
  If you're paying taxes you should change your accountant
  - SJMG 3y ago
    Yes, if you're paying taxes you should engage a wealth management team that knows about collaterialized loans.
- dspillett 3y ago
  If you are making more than enough to pay a significant amount of tax, but get away with paying a derisory amount or even nothing, then you are really winning!
generic92034 3y ago
Well, I for one could live with that... :)
coldtea 3y ago
Oh, the humanity! A founder in that situation is going to just get > 500million, not the full billion! How would they be able to afford food? Also, aren't taxes on things like stocks, equity, etc far lesser than personal income taxes anyway?

dr_dshiv 3y ago

> modicum of humility = turnoff for investors. They only care for chances at homeruns — singles and doubles are not welcome. You’d better swing for the fences, because that’s the purpose of VC. (This is my understanding, not my endorsement. Please correct as needed)

coldtea 3y ago
>= turnoff for investors Given the situation described in TFA, that's just as well.
hnbad 3y ago
No, that seems about right. Traditionally investors prefer investing in a number of moonshots with the hopes that one of them succeeds to such an extreme that it pays for the losses on the rest. There are even some investors known to invest in direct competitors to hedge their bets. The question only seems to be whether this strategy still works in a higher interest rate environment. As I understand it this development mostly stems from it being more profitable to invest with a low ROI (or a low probability of a high ROI) than to keep the money in the bank.
highwaylights 3y ago
That’s the model essentially. Makes a lot of sense too. Anyone can get S&P 500 returns with little to no risk. That’s not to say they won’t lose money but it’ll be market returns either way, will be very liquid, and readily transparent to the holder. Given the risk involved in early stage investment the maths just don’t make sense for an investor to shoot for anything short of the moon. tldr; Seed funding / early stage investing is closer to lottery tickets and Vegas than to your 401k.
- godzillabrennus 3y ago
  There are motivations beyond return. Alignment of capital with values to support a team/product/service that you believe will help in a manner you care about.
  - 3y ago

coldtea 3y ago

>Does anything have a $1B payout for the founder? Instagram perhaps? Also, an IPO?

zer00eyz 3y ago

>> Does anything have a $1B payout for the founder? WhatsApp likely did. Minecraft as well.