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Mainly because venture investors need to get their capital back, so they can invest it in new startups. But another problem with dividends is that they'd be so
by pg 17y ago
Mainly because venture investors need to get their capital back, so they can invest it in new startups.
But another problem with dividends is that they'd be so easy to spoof. It would be easy to claim that a business was making no money while finding ways to funnel it to oneself. That's what record labels have traditionally done to musicians: they give them a percentage of the net, then arrange that the net is near zero.
- jhancock 17y ago"they'd be so easy to spoof" This could be managed through stipulations in share class or additional contract with the investment. The reason record companies get to screw musicians is because the musicians don't get to negotiate the contract.
- bokonist 17y agoMainly because venture investors need to get their capital back, so they can invest it in new startups. The most common investors in the venture capital asset class are pension funds and university endowments. They have the least need for liquidity of any investors in the economy. They should be indifferent between selling the stock at market price and holding the stock forever. And they should be able to fund new rounds of startups from the cash flow of their overall portfolio. It would be easy to claim that a business was making no money while finding ways to funnel it to oneself. If investors of any company cannot prevent management from looting then there is a major problem. But investors can fire the management. Musicians have no such leverage.