

Reasons Not To Take VC Money  - peter123
http://www.siliconvalleywatcher.com/mt/archives/2009/05/7_great_reasons.php

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philwelch
"What if you end up with a very profitable, modest sized business that you
want to just run? That is no longer an option once you raise VC money."

Why hasn't the market produced a VC variant that's content with this, and
willing to earn back its investment over the course of long term dividends? My
guess is, the numbers just plain don't work out. If VC's are 10% successful,
each successful startup has to pay for 9 failures. A VC might be 25%
successful choosing successful dividends-bearing companies, but (a) those
won't make up for the remaining 65% of failures and (b) the amount of
dividends needed would dilute profits, so the founders wouldn't be any better
off than if they didn't take the VC money in the first place.

~~~
pg
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.

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bokonist
_Mainly 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.

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jsonscripter
I'm sure there's just as many reasons to take VC money. It totally depends on
your business plan.

