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> would you talk to a lot of the startups in the current batch about collectively sticking to a lower percentage like 15% I'm not a lawyer or even a particular

> would you talk to a lot of the startups in the current batch about collectively sticking to a lower percentage like 15% I'm not a lawyer or even a particularly skilled investor, but that smells like an SEC violation. Even if it wasn't, I think it'd be something akin to price fixing. Would someone who knows more care to chime in? Am I wrong?

malandrew 13y ago
Isn't the current situation of 20% as a bottom limit the same? The US has a history of cartel like behavior in finance. Just look at the percentage charged for IPOs [0]. I'm sure if you created a similar graph for venture capital financing that you'd see a black line on the graph just like the one created by Mark Abrahamson, Tim Jenkinson, and Howard Jones. Trying to break that 20% barrier would seem acceptable. After all, the goal here isn't to get the VCs to take less equity for the same amount of money, but to provide more flexibility in the tradeoff between cash and equity. [0] http://www.sbs.ox.ac.uk/research/people/Documents/Tim%20Jenkinson/AJJexecsum.pdf http://www.sbs.ox.ac.uk/research/people/Documents/Tim%20Jenk...
- benjamincburns 13y ago
  Some questions: Do you believe that the 20% as a bottom limit is the result of a group colluding with intent, or is it just the result of a type of evolutionary convergence? By chain rule, as long as the market has some modicum of elasticity, isn't fixing supply analogous to price fixing? Maybe I'm assuming that the supply of appealing early stage equity is much lower than it is? Or is something flying over my head and this has nothing to do with supply of said equity? I definitely agree on the bigger point. The whole early stage equity market is weird as hell, and it seems like there are plenty of opportunities to manipulate/exploit it.
  - malandrew 13y ago
    I would say culture and sometimes intentional and sometimes unintentional collusion. Investments are made in other industries all the time and the percentage owned after an investment can vary dramatically, from fractions of a percent to majority ownership. What makes VC investments so special that its own nature would result in settling upon a nice conveniently round number like 20%? Plus, the 20% isn't fixed in stone. It's an asymptote. It's not unusual for it to range as high as 30 to 35%. I'd love to see a graph like the one in the IPO study. I'm sure it would be very illustrative of collusion.

malandrew 13y ago

Isn't the current situation of 20% as a bottom limit the same? The US has a history of cartel like behavior in finance. Just look at the percentage charged for IPOs [0]. I'm sure if you created a similar graph for venture capital financing that you'd see a black line on the graph just like the one created by Mark Abrahamson, Tim Jenkinson, and Howard Jones. Trying to break that 20% barrier would seem acceptable. After all, the goal here isn't to get the VCs to take less equity for the same amount of money, but to provide more flexibility in the tradeoff between cash and equity. [0] http://www.sbs.ox.ac.uk/research/people/Documents/Tim%20Jenkinson/AJJexecsum.pdf http://www.sbs.ox.ac.uk/research/people/Documents/Tim%20Jenk...

benjamincburns 13y ago
Some questions: Do you believe that the 20% as a bottom limit is the result of a group colluding with intent, or is it just the result of a type of evolutionary convergence? By chain rule, as long as the market has some modicum of elasticity, isn't fixing supply analogous to price fixing? Maybe I'm assuming that the supply of appealing early stage equity is much lower than it is? Or is something flying over my head and this has nothing to do with supply of said equity? I definitely agree on the bigger point. The whole early stage equity market is weird as hell, and it seems like there are plenty of opportunities to manipulate/exploit it.
- malandrew 13y ago
  I would say culture and sometimes intentional and sometimes unintentional collusion. Investments are made in other industries all the time and the percentage owned after an investment can vary dramatically, from fractions of a percent to majority ownership. What makes VC investments so special that its own nature would result in settling upon a nice conveniently round number like 20%? Plus, the 20% isn't fixed in stone. It's an asymptote. It's not unusual for it to range as high as 30 to 35%. I'd love to see a graph like the one in the IPO study. I'm sure it would be very illustrative of collusion.