
Ask HN: How common is preferred dividend in a seed round nowadays? - lun4r
An investor asks for a 6% cumulative dividend. I&#x27;ve been reading up but there seems to be a disagreement whether this is a common term or not and whether to accept or avoid in a seed round. Any thoughts?
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brudgers
Random internet remark:

To me, an investor seeking dividends has objectives that are misaligned with
the capital structures typically beneficial for startups of the type
associated with Silicon Valley. Dividends provide regular cash flows to
investors at the cost of a reduction in the working capital of the business.
Nothing wrong with that, it can be a good fit for businesses that maintain a
steady size or expected to have linear growth. However, those are not
characteristics of businesses typically considered by Silicon Valley venture
capital type investors. That sort of money seeks compounding growth. Rather
than extracting dividends, the goal is reinvestment of cash on hand to further
fuel growth. These investors seek returns based on an increase in the value of
the underlying equity (i.e. shares of stock). Amazon's historic lack of
profits and ever rising share price provides a good example of this
model...Amazon kept getting bigger by reinvesting revenue and putting more
assets on the books and Amazon's shareholders made capital gains by holding
the shares. Most investors are not really suited to Silicon Valley type
startup investing. Likewise, most new businesses are not really startups in
the sense that they are structured to provide returns via compounding equity
growth. This doesn't mean that the investment terms are bad. It just means
they may or may not be suited to your particular case. Good luck.

