Kickstarter Just Did Something Tech Startups Never Do: It Paid a Dividend (bloomberg.com)

Joshua Brustein, reporting for Bloomberg: In early March, Kickstarter quietly sent shareholders a dividend. In the wider world of business, such an action would be unremarkable. More than 80 percent of the companies in the S&P 500 pay dividends, and many smaller companies do, too. But divvying up quarterly profits with shareholders is unheard of among tech startups. People who follow the venture capital industry were hard-pressed to come up with a single example of a VC-backed startup that has ever paid regular dividends. Doing so would be a rejection of the industry's basic math. VCs bet that they can find the few companies that will generate enormous payouts by going public or getting acquired; the rest fail. There's not supposed to be anything in between. "It sounds strange for a VC-backed company as it means they're taking out and distributing money versus investing it in the business," said Anand Sanwal, the chief executive officer of research firm CB Insights. Paying a dividend, which the company didn't make public, is just the latest example of Kickstarter's heterodoxy.

Comments

paying dividends is dumb

[ooloorie]

Tech startups need capital, and reinvesting the profits they make is an easy way of getting that. If they pay out their profits as dividends and then raise more capital by issuing more shares, they pay a premium for that capital and take a risk as well. Paying dividends also screws shareholders because dividends are taxable immediately, while the capital gains from reinvestment only are taxed when the shares are sold.

Re:paying dividends is dumb

[NotInHere]

Paying dividends also screws shareholders because dividends are taxable immediately

Kickstarter has declared itself a "public benefit corporation": https://www.kickstarter.com/bl...

According to TFA that includes to not exploit tax loopholes. Very sad that companies that "just" pay their taxes are regarded as "public benefit corporation", and are not the norm.

They use the infrastructure, they benefit from the state keeping them secure. And they expect to not pay anything for it.

According to TFA, Kickstarter is going down the "never IPO" path.

Re: paying dividends is dumb

[um... Lucas]

Maybe they just don't foresee a need for the capital, and would rather let their shareholders decide where to invest it rather than have to act as a steward of unneeded funds?

Re:paying dividends is dumb

[EnsilZah]

They serve text and and video, and in exchange they take 5% of the money pledged to projects.
I'm sure they have their servers and a team to maintain and keep their code and design current all covered.
So what exactly do they need capital for?
Do you expect them to branch into unrelated fields, build their own OS inside a browser, explore how 3D-printed IoT VR-goggles can be leveraged for crowdfunding just because they have some spare cash?

Re:paying dividends is dumb

[Anonymous Coward]

There are currently plenty of tech firms sitting on mountains of cash---not reinvesting nor doing anything productive with all that capital. Where would you propose any company invest cash right now and get a better use out of it than... well... giving it back to the shareholders? (or is piling up a hundred billion in cash somehow good for the shareholders?---and yes, I know it's not kickstarter who has a hundred billion in cash just sitting there gathering dust---or waiting for some stupid overpriced acquisition that will blow up a few years down the road)

Re:paying dividends is dumb

[lgw]

It's certainly weird for a tech startup, but it's weird in a very Kickstarter-ish way, isn't it? Good on 'em, says me.

Re:paying dividends is dumb

[es330td]

Paying a dividends demonstrates financial viability. They significantly increase their ability to raise capital showing that they aren't losing money.

Re:paying dividends is dumb

[Anonymous Coward]

Well, you could always give raises and bonuses to the CEO and senior executives.

Poor things, they work so HARD!

Re:paying dividends is dumb

[Anonymous Coward]

Paying a dividends demonstrates financial viability. They significantly increase their ability to raise capital showing that they aren't losing money.

Yep, if a stock doesn't pay a dividend then I don't care to own it. I'm in for the long haul, not a quick buck.

Re:paying dividends is dumb

[ooloorie]

So what exactly do they need capital for?

Advertising, insurance, buying out their competitors, for example.

Do you expect them to branch into unrelated fields

No, but they might branch out into related fields, like makerspaces, startup labs, business support services, insurance, legal services, escrow services, etc

Re:paying dividends is dumb

[ooloorie]

According to TFA that includes to not exploit tax loopholes.

Choosing to reinvest instead of paying dividends is not a "tax loophole", it's the essence of growing businesses.

They use the infrastructure, they benefit from the state keeping them secure. And they expect to not pay anything for it.

That's total bullshit. All corporations pay for infrastructure through property tax, sales tax, business tax, and (effectively) income tax.

US corporations also pay some of the highest taxes in the world, which is why many of them are moving overseas.

According to TFA, Kickstarter is going down the "never IPO" path.

And they may well pay the price for it and become irrelevant.

Re:paying dividends is dumb

[ooloorie]

It's not such a good thing if they run Kickstarter into the ground.

Re:paying dividends is dumb

[lgw]

I'm sure they're watching their cashflow: it's pretty much the central focus of all small businesses. Paying a dividend signals that they're not planning to expand into more kinds of business (at least not capital-intensive kinds), and protects against hostile takeover, both of which which personally I like. Grow at what you know you're good at, not by random nonsense.

Re:paying dividends is dumb

[Hylandr]

And they may well pay the price for it and become irrelevant.

More of the "Do it the way I say you should or you will fail declarations".

I also smell another shill:

http://www.americansfortaxfair...

http://www.thefiscaltimes.com/...

Re:paying dividends is dumb

[Hylandr]

This guy gets it.

Just because you can afford to do something doesn't mean you are *compelled* to do it.

Do your ONE THING and do it well. The rest is Dividends.

I say bravo!

Re:paying dividends is dumb

[sheetsda]

the capital gains from reinvestment only are taxed when the shares are sold.

Not paying dividends does not guarantee rational reinvestment much less subsequent growth:

"... by late 2001, Oracle Corp. had piled up $5 billion in cash. Cisco Systems had hoarded at least $7.5 billion. Microsoft had amassed a mountain of cash $38.2 billion high - and rising by an average of $2 million per hour. Just how rainy a day was Bill Gates expecting, anyway? ... In short, most managers are wrong when they say that they can put your cash to better use than you can. Paying out a dividend does not guarantee great results, but it does improve the return of the typical stock by yanking at least some cash out the managers hands before they can squander it or squirrel it away."

- Jason Zweig "The Intelligent Investor, Revised Edition"

I only invest in shares that pay dividends. My strategy is to use my dividends to buy new shares in other companies. This increases my diversification, and since those companies pay dividends too, results in exponential, albeit slow, growth. I view tax as the price of this defensive posture, just like I view more transaction fees as the price of diversification.

Re:paying dividends is dumb

[rgmoore]

US corporations also pay some of the highest taxes in the world, which is why many of them are moving overseas.

More accurately, the US has one of the highest nominal corporate tax rates in the world, which is why US corporations work so hard to exploit (and lobby to create) the many loopholes in the system. The US corporate tax system is an excellent example of a case where it would be far better to lower the tax rate and broaden the tax base by eliminating loopholes.

Re:paying dividends is dumb

[Darinbob]

Dividends used to be the standard way to get paid by owning stock, especially with blue chip companies. This is basic profit sharing to the shareholders. Now in the "new" economy it's all about growth, growth, and more growth. The money is made through speculation instead, hoping that the stock price rises and that you can sell it before it goes back down.

For example, if you invest in uncle Joe's restaurant you can ask that you be paid a percentage of the profits each year if there are any. So fine, pay $1000 and get back $5 a month, and when you tire of it sell of you $1000 stake to someone else. And you also get a bit of voting rights along with the other investors. As long as Joe is making a profit then you are making some money. And Joe gets $1000 to help pay off the cost of running the place in the early days. The shareholders in this model want the dividends. It's a good investment. That's basic capitalism.

On the other hand it would be naive to assume Joe's restaurant business will grow much, he'll get more customers maybe but there will be a natural leveling off. With luck there may be two restaurants someday, but you can't count on luck. It'd be really stupid and naive to assume Joe's going to have a big restaurant chain someday. And yet that's how startups work, everyone assumes that they'll be insanely rich someday, the utter morons will believe they'll be insanely rich even before turning a profit, and the truly deranged will mortgage their house based on this (which often leads to divorce). These shareholders don't want their investments diluted before they become insanely rich. This is all about making a risky investment in hopes of a big payout, no different than gambling at Vegas (except that the odds are better in Vegas).

Re:paying dividends is dumb

[Darinbob]

Yup, if you're paying significant taxes as a corporation then you need to get better accountants. Companies do not stay in the US because of patriotic loyalty, they stay because they're making good money.

Re: paying dividends is dumb

[Darinbob]

A lot of companies don't see the need to grow continuously. When the business is stable and now growing then paying dividends is the common to share profits with the shareholders. Who else do you give profits to other than the owners? Very often the person who started the business is desperate to get some of that money back (legally) to pay off bank loans used to start the business. So there's a mix of putting some profits back into the business and some profits to pay the owners.

A company that gives out dividends is a good sign, it says that the company is confident about profitability. You don't see this much in tech startups because tech startups are usually risky ventures run by risky people who are not funded by banks who want a regular loan payment but by VCs who want to strike it rich also.

Re:paying dividends is dumb

[Pfhorrest]

How about instead we don't tax the corporations at all, per se, and just tax the people who own them instead. If we implemented my other suggestion below, for all corporate profits to be mandatorily paid out as dividends (which can then be automatically reinvested or not at the shareholder's preference), and that would happen automatically, because dividends are taxable income. This would shift the tax burden onto high-income people, especially those who own and control big chunks of the economy, and away from small businesses that might be owned and operated by low-income people, while also not chasing away big businesses that could afford to move overseas, because the corporation per se is not taxed at all.

Re:paying dividends is dumb

[thegarbz]

Paying dividends also screws shareholders because dividends are taxable immediately

Every company I have shares in gives the option of how the dividend is paid out, in dollars or in additional shares. The latter is not taxable the same way as cash and doesn't screw over anyone.

Re:paying dividends is dumb

[Anonymous Coward]

You are stupid and probably poor.

Re: paying dividends is dumb

[um... Lucas]

Absolutely.

Kickstarter isn't in the business of directing investment itself, just giving others a platform to do that. And really, outside of a continuous marketing budget and platform upgrades to accommodate expected growth, if they're taking in much more money than what those two require (along with regular operating expenses, reserving funds for emergency, etc), then they very well might have met the goal they set for themselves, and feel comfortable making distributions.

Kickstarter isn't an eBay type site, where the sky is almost the limit insofar as how much infrastructure they need. Nor is it a VC firm itself, so it does't need to keep funds available for the next opportunity. It's a beautiful, simple platform. I'd say "why muck it up" but clearly, the people operating it understand that as well and would prefer to stay focused on their original intent rather than say "heyyyyy look! We have all this money, what else can we do with it?"

Re:paying dividends is dumb

[Anonymous Coward]

If you're an ethical startup company, you're trying to provide value to ALL your shareholders. That includes employees, founders, and investors. Generally, Silicon Valley startups forget about those first two groups because of the extreme imbalance of power between employees and investors. Many founders and employees take lower salaries and invest in the company directly at an early stage. 4-5 years in, those folks need to see some liquidity, or they're forced to look for a higher salary job outside the company they helped start. Taxes are really far down the list of priorities when your founding team is still struggling to make mortgage payments while the company is profitable.

Because of the way modern VC investment works (preferred shares), investor shares are heavily favored over employee shares when it comes to purchase of the company and IPO. The general pattern in the VC world is that the last investor in the company makes the most profit. This is also the person who took the least risk. It's insane and completely backwards, but driven by the leverage of the very small number of people willing to write big checks.

In contrast, issuing a dividend treats all your shareholders equally, and provides real and equitable value to those shareholders. With a profitable and ethical company like Kickstarter, expect to see more ESOP programs and dividends in the future, rather than company buyouts that screw angel investors and employees. Importantly, this does NOT remove the ability of late stage VCs to turn a great profit on their investment. It means the company can wait until the economy is ripe for that big IPO/acquisition, while taking care of the employees and founders who do not have the financial resources to wait out an economic downturn.

Re:paying dividends is dumb

[Anonymous Coward]

That would pretty much make being an owner/president of the company a completely pointless position as they could no longer make decisions for the future of the company. I know that in some egregious cases there are those of us who would say that's a great idea, but generally, companies work well when the decisions are made from the top down, rather than the bottom up.

That doesn't meant bottom up decisions are to be ignored, but rather, the bulk of the ideas at the bottom don't have the overall view of the company that executive management has and thus the business would tear itself apart trying to go in a million different directions.

Re:paying dividends is dumb

[Pfhorrest]

The chief executive of the company would still have complete control over how the money reinvested in the company is spent, it would just be up to the shareholders collectively to decide how much of the profits to reinvest and how much to pay out to them.

Consider a company with a single investor, a sole proprietor, who is nevertheless not the actual manager of the company; he pays someone else to run the thing. But he gets to decide how much to pay himself out of the company's proceeds, and how much to leave in the company's coffers for the manager to work with. Of course he gets to decide that, he owns the company and if he can't take his money out of it what's the point in that? This is just extending that principle to a company with multiple, possibly myriad, owners.

Of course that sole proprietor would be stupid to take all the money and let the company die with no capital, but there's incentive for the investors in a bigger company not to do that either: by reinvesting their dividends, they grow their share in the company, and thus the size of their dividends, both in the percent of the company's profits they're entitled to, and in the profitability of the company overall. Those who just take their dividends and run get a diminishing share of a diminishing pie over time and are automatically cashed out of the process, leaving only the people with long-term interest in the company owning it.

Re:paying dividends is dumb

[Anonymous Coward]

No, but they might branch out into related fields, like makerspaces, startup labs, business support services, insurance, legal services, escrow services, etc

Why? Kickstarter is not a VC fund. It shouldn't be investing in startups. Even if they wanted to expand into the markets you cite, why should Kickstarter take all the risk? Why not sit back and watch 100 other startups take that risk with $1M of their own seed capital each, watch 99 of them fail (100% loss for those investors, $0 loss for Kickstarter), and pay $10M (providing a 10:1 return for the one that got some traction!) to acquihire the team from the one survivor that might someday pose a competitive threat?

Re:paying dividends is dumb

[ooloorie]

Dividends used to be the standard way to get paid by owning stock, especially with blue chip companies. This is basic profit sharing to the shareholders. Now in the "new" economy it's all about growth, growth, and more growth. The money is made through speculation instead, hoping that the stock price rises and that you can sell it before it goes back down.

There is no "speculation" involved. Let's say a company has 1 million outstanding shares and makes a profit of $5 million. If it pays that entire profit as dividends, that means paying $5/share. If it puts that profit in the bank, the share values simply go up by $5 each and you can realize that profit by selling your shares.

Re:paying dividends is dumb

[ooloorie]

In addition to having one of the highest nominal corporate tax rates in the world, the US also has one of the highest median corporate tax rates as well (i.e., after "loopholes"). If it didn't, US corporations wouldn't be trying to hard to get taxed overseas, and that is on top of high capital gains taxes. Sweden, incidentally, has one of the lowest median corporate tax rates.

http://www.forbes.com/pictures...

http://taxfoundation.org/artic...

Re:paying dividends is dumb

[ooloorie]

Not paying dividends does not guarantee rational reinvestment much less subsequent growth.

Correct.

I only invest in shares that pay dividends.

That's just stupid. If a company doesn't pay dividends and instead keeps its profits in cash or reinvests them, you can simply take the money out of that stock and diversify by selling shares. The point is: keeping the profits gives you, as a shareholder, more options. If they pay (cash) dividends, you lose options and are forced to pay taxes.

Re:paying dividends is dumb

[ooloorie]

If you are given the option of receiving your dividends in either stock or cash form, then the dividends are taxable even if you choose to take them in stock form. The same is true for DRIPs.

Re:paying dividends is dumb

[ooloorie]

The US corporate income tax system is very much out of kilter, with some well connected corporations getting large tax breaks and others getting screwed.

Now, if you believe that US companies should be taxed in the US on their worldwide income (as your links suggest), it follows logically that they can't also be taxed on their local income in, say, Germany or Japan, since otherwise you end up with marginal tax rates that are way too high. In addition, it also follows that the same should be true in reverse. So, German companies like T-Mobile, Volkswagen, BMW, DHL, Trader Joe's, Henkel, or Mercedes then shouldn't be taxed at all in the US or on their US profits, right? Is that the principle you want, that each corporation only gets taxed in its home country? Or are you advocating that all corporations worldwide get taxed in the US? Or are you advocating that all corporations get double-taxed on all their profits? Or what?

As for the charge of "shill", that bogus accusation is the last resort of the ignorant and incompetent.

Re:paying dividends is dumb

[ooloorie]

Paying a dividend signals that they're not planning to expand into more kinds of business

That would be a pretty costly signal to stockholders in a publicly traded corporation. I think in this case, the answer is much simpler: Kickstarter isn't publicly traded. Far from being a noble gesture, that means that paying a dividend to themselves is a simple way in which the owners of Kickstarter can take out money for themselves.

Re:paying dividends is dumb

[Pfhorrest]

Only if all investors followed a value investment strategy, which they don't. A lot of investors may see that profit as a big positive upturn in the company and want to get in on that rising action, and so will pay more than just the $5/share to get in on that. Or that may be a big decrease in profits from last quarter, kill everyone's faith in the company, and cause lots of investors to sell for cheap just to get out now before it gets worse. Stock prices are set by markets, what people are willing to buy and sell for, and not all -- not even most -- investors just look at a company's net assets minus liabilities and divide by number of outstanding shares to decide how much each share is worth.

Re:paying dividends is dumb

[ooloorie]

What I said is true independent of what irrational investors believe.

Re:paying dividends is dumb

[sheetsda]

you can simply take the money out of that stock and diversify by selling shares

This strategy relies on the stock price constantly growing and assumes that the growth is dependent on the profits being kept, and that the growth can be maintained, and that the growth is by a greater dollar amount than the dividend otherwise would be. These are assumptions I am not willing to make and if any of them is false I'm better off receiving the dividend.

Re:paying dividends is dumb

[Pfhorrest]

No it's not, because what those perhaps-irrational investors believe (in speculation) is what sets the market value of the shares and thus what you could buy or sell them for. Pointing out that the market price per share is different from the net asset value per share isn't magically going to make the market (composed mostly of possibly-irrational speculative investors) sell to you or buy from you for that net asset value, and it's not like you can force the company itself to take back your share (or issue you a share) for a share's worth of their net assets either. The only relation between asset value and stock price is whatever relation the market in aggregate believes there should be, and for the most part that is 'not much' (though still some).

Re:paying dividends is dumb

[ooloorie]

This strategy relies on the stock price constantly growing

It's not a "strategy" and it doesn't "rely" on anything. If a company has $5 million in profit and doesn't pay it out as a dividend, the stock goes up on average by as much as the dividend would have been. At that point in time, you can rebalance your portfolio the same way you would have done with a dividend payment.

and that the growth is by a greater dollar amount than the dividend otherwise would be

No, it assumes that the growth related to not paying the dividend is, on average, equal to the dividend, which it is.

These are assumptions I am not willing to make and if any of them is false I'm better off receiving the dividend.

Well, there are a lot of irrational investors, and you are evidently one of them.

Re:paying dividends is dumb

[ooloorie]

No it's not, because what those perhaps-irrational investors believe (in speculation) is what sets the market value of the shares and thus what you could buy or sell them for.

Irrational investors can't indefinitely misjudge stock values; any who do run out of money. Remember that for every seller there is a buyer and vice versa. Money accumulates with the people who make correct decisions. On average, dividend payments and stock price changes are related rationally. On average, in the absence of taxation, a $5 dividend payment per share should be the equivalent of a $5 increase in stock price. In the presence of taxation, a $5 dividend payment is the equivalent of a slightly larger increase in stock price, which is why you see few dividend payments these days.

Remember, I'm not arguing for the existence of some hypothetical, bizarre relationship between dividends and stock price, I'm providing an explanation for the observation that companies have become increasingly reluctant to pay dividends.

You are right that paying dividends used to be a simple way for companies to signal to their stockholders that they were successful; but that mechanism isn't that important anymore with the widespread and detailed financial reporting on companies.

Re:paying dividends is dumb

[Hylandr]

Detailed discussions of Tax brackets for corporations is beyond my interest or knowledge for the same reason I have no interest in restoring a vehicle that's been crushed.

In my opinion both entities are in the same state.

As for the charge of "shill", that bogus accusation is the last resort of the ignorant and incompetent.

No, that's the word to describe astro-turfers or professional trolls pushing a propaganda set by their employers financial or political motivations. I could be wrong but if it posts like a duck, and debates like a duck chances are high it's not a Llama, but bloody duck.

Re:paying dividends is dumb

[Darinbob]

Most of these tech companies don't make a profit, Plenty of them never will make a profit, ever. So people are speculating based upon an analyst's wild ass guess as to what the company is worth. A company that pays dividends gives you $5/share and that's money in the bank if you like, or you can reinvest also. Shares don't go up just because the profits are rolled into growth, they shares only go up if the market wants them to go up (usually because an analyst gives a good rating).

Things did used to be more stable back when there were fewer investors and most investors were professionals. Now everyone's in the market and the pros are doing trades where every millisecond count, and most activity is with short term trades and not long term investments. Because the market forces see this churn of short term investments that affects the value even of stocks held for the long term.

Re:paying dividends is dumb

[ooloorie]

Detailed discussions of Tax brackets for corporations is beyond my interest or knowledge for the same reason I have no interest in restoring a vehicle that's been crushed.

Because you are terminally stupid? Because you are a proto-fascist?

No, that's the word to describe astro-turfers or professional trolls pushing a propaganda set by their employers financial or political motivations.

Indeed, I have a strong financial interest in corporations doing well: my retirement and economic well being depend on it. So does everybody's, including yours, whether you are a welfare recipient or a corporate CEO. You simply are too stupid to realize it.

Re:paying dividends is dumb

[ooloorie]

Most of these tech companies don't make a profit, Plenty of them never will make a profit, ever. So people are speculating based upon an analyst's wild ass guess as to what the company is worth.

That's completely independent of whether a company pays out their profits as dividends or puts them in the bank. Balance sheets are not based on analyst's guesses.

Things did used to be more stable back when there were fewer investors and most investors were professionals.

Well, no, not really. Check other measures of volatility if you like.

Not that there is anything wrong with volatility per se.

Now everyone's in the market and the pros are doing trades where every millisecond count, and most activity is with short term trades and not long term investments. Because the market forces see this churn of short term investments that affects the value even of stocks held for the long term.

If Apple's financials are bad or Microsoft screws up a product launch, thereby depressing expected future profits, why shouldn't the stock price reflect that immediately? If Google shares trade $0.01 higher on one exchange than on another, why shouldn't short term trades ensure that the prices equilibrate across the two exchanges?

Re:paying dividends is dumb

[Hylandr]

Because you are terminally stupid? Because you are a proto-fascist?

Ad-Hominem Attack; Liberal Detected.

Re:paying dividends is dumb

[ooloorie]

An "ad hominem" would be to say that your argument is wrong because of who you are. I simply gave a name to your political ideology and your way of thinking ("detailed discussions of Tax brackets for corporations is beyond my interest or knowledge"). You just want to stick it to corporations without really known why or what the consequences are. That pretty much describes the early years of European fascism.

Re:paying dividends is dumb

[sheetsda]

No, it assumes that the growth related to not paying the dividend is, on average, equal to the dividend, which it is.

[Citation needed]

there are a lot of irrational investors, and you are evidently one of them.

See also: ad hominem.

This is the book I base my strategy on. Its author is Benjamin Graham, the mentor of the better known Warren Buffett. If you think my implementation is wrong I'm interested in what you have to say (with references to the points made this or some other authoritative source, of course). At the moment from you have offered nothing to back up your claims and have no more credibility than any other random person on the internet. Claiming the strategy is irrational is simply silly given that I can look up the results of Graham's various direct proteges.

Re:paying dividends is dumb

[Hylandr]

Spin it!

Re:paying dividends is dumb

[ooloorie]

This is the book I base my strategy on. Its author is Benjamin Graham

I seriously doubt that Benjamin Graham advised Warren Buffet to pay taxes unnecessarily. In fact...

Berkshire Hathaway does not pay a dividend because its chairman and CEO, Warren Buffett, believes it is more auspicious to allocate the company's earnings in other ways. In particular, Buffett prefers to reinvest profits in things that allow his company to improve its efficiency; expand its reach; create new products and services and improve existing ones; and further separate itself from competitors. Buffett, like many business leaders, feels that investing back into his business provides more long-term value to shareholders than paying them directly because the company's financial success rewards shareholders with higher stock values. Additionally, Berkshire Hathaway maintains an aggressive stock buyback policy that puts cash directly into shareholders' pockets.

So, Buffet seems to agree with me, not you.

In any case, I provided an explanation for why companies rarely pay dividends these days. You're welcome to formulate an alternative explanation. How you personally prefer to handle your taxes is irrelevant to that explanation, since you yourself seem to consider your investment strategy and preference for dividends atypical.

Re:paying dividends is dumb

[Anonymous Cow Ward]

Paying dividends versus investing doesn't change Kickstarter's taxes, only (potentially) the taxes that the individual shareholders pay.

Re:paying dividends is dumb

[Anonymous Cow Ward]

You mean like the Ad Hominem attack you opened this thread with? I guess that makes you a liberal too, huh?

Re:paying dividends is dumb

[Hylandr]

I find it Interesting that you consider being called a liberal insulting. That was unexpected and not my intention but it certainly says a lot about how you feel about liberals.

Have fun with that.

Re:paying dividends is dumb

[Anonymous Cow Ward]

Quality argument there, AC. Good job. Such a great contribution.

Re:paying dividends is dumb

[Anonymous Cow Ward]

I don't, personally. But you followed up your claim of an ad hominem by saying "Liberal Detected". I was just continuing your logic, under the assumption you were using it as an insult. Apparently, that was wrong. Oh well.

Re:paying dividends is dumb

[Hylandr]

I am sure you know what is said by 'assume'.

Re:paying dividends is dumb

[Anonymous Cow Ward]

I don't, but you just confidently asserted that I do.

/joke

Re:paying dividends is dumb

[Hylandr]

Well Played. :)

color me not surprised

[Anonymous Coward]

Kickstarter is old, no longer a start up.

Re:color me not surprised

[sexconker]

Yeah, why the fuck are people calling it a start up?

Re:color me not surprised

[Darinbob]

Because startups are cool. Like fezzes.

Useless, leeching middleman...

[Anonymous Coward]

Since Kickstarter epitomises the degenerate capitalist spirit - provide no value beyond handling cash and taking a hefty cut - it's no surprise that it would be one of the business models so successful that it can afford to pay its shareholders a dividend.

Which is ironic when it's business is giving the chance for other start-ups to receive investment without ever having to pay back their investors.

We really are back to the feudal attitude where people felt a loyalty to the boots they licked.

Re:Useless, leeching middleman...

[chadenright]

I would point out the many flaws in your logic, but your use of the word "degenerate" in that context suggests you adhere to a mindset where pointing out the flaws in your logic would only make you angry, and not actually lead you to revise your logic. It is possible that I am mistaken. If that is the case, please elucidate and I will debate your points.

Re:Useless, leeching middleman...

[Anonymous Coward]

Corporate Capitalism has become degenerate in this country by definition nearly all of them are an immoral or corrupt and according to the supreme court they are people so degenerate is correct.

Tech Company?

[friesofdoom]

Kickstarter is a tech company? Really? What tech do they manufacture and sell? I was obviously under the misunderstanding that they were a crowd funding company... Guess i was wrong and should be waiting for my new KickStarter OS or phone or something...

Or has the definition of tech company changed to any company that uses 'tech'? By that standard my dads building company is a tech company... He uses a computer too!

Re:Tech Company?

[Darinbob]

Most tech startups that I see have little to nothing to do with technology either. If they're online then the masses call them "tech". After all they called Amazon a tech company when all it did was sell books.

Re:Tech Company?

[drinkypoo]

Kickstarter is a tech company? Really? What tech do they manufacture and sell?

False hopes. But more seriously, they're a company that's all-tech. A handful of people, and a website. The only thing they manufacture and sell (or rent, anyway) is their website. That makes them a tech company. The tech is not impressive or groundbreaking, but it's all there is.

Or has the definition of tech company changed to any company that uses 'tech'? By that standard my dads building company is a tech company... He uses a computer too!

Kickstarter's product is the use of their website. Your dad's building company's product is presumably buildings, thus they're a building company.

Profitless companies

[DogDude]

I think it's much more surprising that so many people spend so much money on unprofitable companies.

Re:Profitless companies

[NotInHere]

Its the biggest ponzi scheme in human history. I'd have liked to say that the burst of the bubble would be earth shattering, but since 2008 we know that if you succeed to bloat a bubble right in front of the eyes of the regulators (who do nothing), and the market's trust suddenly vanishes, the state will bail you out.

Either way, the funders have made the money of their lifetimes.

Re:Profitless companies

[Opportunist]

The problem is that this scheme only works for as long as the state has the money to bail you out.

Who's going to pay for the upcoming bailout? I only know who cannot.

My wife watches "Shark Tank" all the time . . .

[mmell]

It's not surprising to me that "so many people spend so much money on unprofitable companies" - all you need is one fifty-to-one hit and you're way ahead on the nine total losers you threw money at. It's all about greed. Lovely, eternal greed.

Re:My wife watches "Shark Tank" all the time . . .

[Anonymous Brave Guy]

If you're talking about VC-level investment, that model makes economic sense.

Of course, if you find one 50:1 hit and 99 total losers instead, you're toast.

Even if you find one 50:1 hit and only back 9 losers, you're still no better off than someone who consistently backs modest 5:1 success stories. It always surprises me that we don't see more successful investors using this sort of strategy, given that by the time you're closing VC funding rounds your business isn't likely to be some random six-month-old start-up any more. Maybe those investors just aren't as high profile as the big VCs.

There's a reason..

[atticus9]

Start-ups don't pay dividends, there's higher return opportunities investing back in the company for share-holders. Paying a dividend means that all those opportunities are saturated so you might as well give cash back to investors than hoard it. It seems early to me, but maybe they've reached that point. I'd love to know what the yield was.

It's not unheard of for angel investors in general. They'll invest in 10 start-ups expecting 4~5 will fail, 3~4 will stay in business but never go anywhere, and 1~2 to be 10x successful.

Re:There's a reason..

[aaarrrgggh]

But changing that balance is actually good; it reduces risk and ultimately reduces the return companies must generate. Also, getting investment funding when you actually show a profit is much easier, including conventional means such as a line of credit for short term or term loans for anything over a year.

Re:There's a reason..

[Darinbob]

I really dislike the attitude of demanding huge growth all the time where investment is the same thing as speculation. I'd like to go back to a time when getting a predictable return on investment via interest or dividend was considered the smart thing to do.

All corporate profits should go to dividends

[Pfhorrest]

Every dollar a corporation makes in profits should go to the shareholders as dividends. It's then up to those shareholders to decide where to reinvest in the company, growing their stake in it as they do so and others don't, or to slowly be cashed out as others do so and they don't. Each shareholder should be able to register their preference when they buy into the company; give me my money, or reinvest it, or perhaps even a percentage. The default should probably be to reinvest it, but shareholders are entitled to their cut of those profits if they choose to take them.

This should be a matter of the mandatory legal structure of being a corporation in the first place, not just something that corporations should choose to do.

Re:All corporate profits should go to dividends

[Anonymous Coward]

Ah, I see someone paid attention to Ben Graham :-)

A company that doesn't pay dividends is kinda worthless as an investment---sum up all the cash flows from a non-dividend paying stock, and you'll see that it's worthless... the only way to benefit is to sell it to the next sucker... (which means, the owner of the company does not benefit from operations of the company, only from finding someone more gullable to pay later).

Re:All corporate profits should go to dividends

[Darinbob]

Especially with a company that never makes a decent profit and then becomes bankrupt, but along the way there were lots of buying and selling of stock which ultimately end up worthless. Which means that some people make a lot of money basically by betting that other people would lose a lot of money.

Indeed you see a lot of startups where the primary goal is to be bought out by someone else rather than actually making a viable business or product. The sad thing is that they sometimes succeed which only encourages more of this.

Re:Wow, they're incompetent

[Anonymous Coward]

That's a first for me. Dividends are "throwing away money".

Man, I bet the owners of the company are super pissed that the company is throwing awa... oh wait, they're the ones getting paid.

Good luck getting anyone to buy into your worldview.

SubjectIsSubject

[p0p0]

Kickstarter has been around since 2009. When is a company no longer considered a "startup"?

Re:SubjectIsSubject

[fibonacci8]

Right after chapter 11?

Re:SubjectIsSubject

[erice]

Kickstarter has been around since 2009. When is a company no longer considered a "startup"?

Generally, that mile stone is the IPO. Dividends begin some years after that, if ever. Since they are paying a dividend now, it suggests that Kickstarter does not intend to ever go public. Uber seems to be following a similar plan. I guess they don't want the scrutiny and regulation that comes with being a publicly traded company. I can understand that but on the other hand, some of those regulations are there for good reason.

Re:SubjectIsSubject

[Anonymous Coward]

When they stop going around asking people for money. Though that's all Kickstarter does...

Re:SubjectIsSubject

[Darinbob]

I was at a company that was hugely profitable before being an IPO. There was little consideration about becoming a public company because there was no need for it. Lots of people making lots of money (except for me). This was shortly before the dot-com boom. Then the owners decided that being public was a good thing and went through the IPO process. This annoyed a lot of people because of all the new rules they had to follow (making the books public, telling the truth, etc). Later they went bust (this was shortly before the dot-com bust) and some people went to jail (shortly before the whole Enron thing).

Re:SubjectIsSubject

[Razed By TV]

Kickstarter has been around since 2009. When is a company no longer considered a "startup"?

Once they meet their funding goal.

Re:SubjectIsSubject

[Anonymous Coward]

Plenty of privately traded huge companies that aren't necessarily on the radar of "OMG! Scary accounting practices!". Mars, SC Johnson, LEGO, Rolex, Bosch, IKEA, and PwC. Some companies just prefer to work that way.

Paying Dividends earned from Scams

[OverlordQ]

All the money they're paying out to investors comes from all those scams projects that earn KS a nice percentage.

VC?

[Anonymous Coward]

Is anyone else still trying to figure out what VC means here?

I'm not into finances much, nor editing, but I'm sure there's a rule about defining an acronym before using it.

Re:VC?

[wierd_w]

VC = Venture Captial(ist); Money, (or a person with said money) that is "ventured", with the hope of getting a large return.

IPO == Initial Public Offer; The intial sales price of a stock that just been registered on the public exchange market.

Hmmm

[Anonymous Coward]

Tech is overvalued. I'm an expert, trust me.

heterodox?

[Anonymous Coward]

What is this, a gamergate thing? No queers allowed?

Re:heterodox?

[wierd_w]

Heterodox has nothing to do with who or what you like to fuck. Hetero means "different."

eg,
"Heterogenous" means "different origins"
"heterosexual" means "sex with a different kind of partner"
etc.

"heterodox" is a related word to "orthodox."
That's your clue.

(jesus, why does everyone always think about fucking all the damned time?)

Re:heterodox?

[Anonymous Coward]

jesus, why does everyone always think about fucking all the damned time?

What else is there? What else could possibly motivate all our great conquests? Name one thing...

Re:heterodox?

[wierd_w]

For much of human history?

access to food/material wealth
(while taking advantage of a captured population's women was often considered part of that material wealth, access to increased riches, increased access to food, better housing, and better quality of life were all themselves sufficiently powerful motivators for conquest, without having to include mass rape.)

There is more to life than putting your dick in (or getting a dick/whatever put in) something AC.

Sex is nice, but it is not the ultimate pleasure, and not what you should build your life around. Please stop fixating on it whevever you see word prefixes like "hetero" and "homo", m'kay?

Re:heterodox?

[Anonymous Coward]

Oh! Please! Stop with the *liberal arts*, you poor naive child. You know nothing of biology. The prime directive is reproduction and domination. Conquering armies kill the men and the children so the women will have theirs. The increased riches are to tempt the girl, and it works. A diamond is a girl's best friend.

Kickstarter isn't a startup

[BradMajors]

EOM. End of Story.

You won't believe what this Tech Starup did next

[Gussington]

Revealed: The secret that other startups hate!

Fuck you Slashdot, where has my intelligent news feed gone?

"Just" happened?

[Anonymous Coward]

So this "just" happened ... in March?

Almost a quarter of the year ago is only something that "just" happened if you're measuring in geologic time. Back off the clickbait headlines, Slashdot. We don't need another Reddit clone.

Re: My wife watches "Shark Tank" all the time . .

[samiran8577]

Reliable 5:1 success stories are very difficult to find. Many businesses with sound business models, good people, and in the right place at the right time fail. That being said, there are funds that to try to only pick winners; they invest in groceries (the new chains in Chicago, Mariano's and Fresh Thyme were created this way), rental equipment companies, niche manufacturers, etc... of course, they make the founders co-invest, and really prefer businesses that already have a proven business model. This tends to be less exciting than the billions VCs invest in wannabe Unicorns, and as such aren't really newsworthy events. Past the VC stage, this kind of investing is called "Community Banking". Probably effects more of our lives than tech Unicorns.

Re: My wife watches "Shark Tank" all the time . .

[Anonymous Brave Guy]

Reliable 5:1 success stories are very difficult to find.

True enough, though they are still much easier to find than 50:1 success stories.

Many businesses with sound business models, good people, and in the right place at the right time fail.

That seems rather pessimistic. Certainly many businesses fail, but a great deal of the time when they do, it is precisely because one of the elements you just mentioned was missing. A business that really has found product-market fit, has good people running it, and has access to the resources it needs for those people to exploit that fit is basically a money-printing machine.

I suspect the issue for VCs is simply that by the time you're looking at a series A, you probably already have a good idea of whether all of those things are true. For an investor looking for spectacular returns, the window might already be closed by the time founders/angels know they're onto a good thing and the interesting questions are how good and how soon. Better to look for something you believe could be spectacular while there is still an element of risk to keep the price down, particularly if you can find a time when a big cash injection would dramatically improve the odds of success.

Kickstarter vs kickstarter project

[Anonymous Coward]

At first I thought the headline meant that a kickstarter project paid a dividend - rather than the usual "rewards" or whatever they're called. That would be even more unusual. I believe it's against securities laws, though. There was a move a few years ago to allow it, basically allowing kickstarter projects to be like mini-stock sales. I guess that fell apart?