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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.
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.
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!
I think it's much more surprising that so many people spend so much money on unprofitable companies.
I don't respond to AC's.
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.
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.
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.
-Forrest Cameranesi, Geek of all Trades
"I am Sam. Sam I am. I do not like trolls, flames, or spam."
Kickstarter has been around since 2009. When is a company no longer considered a "startup"?
All the money they're paying out to investors comes from all those scams projects that earn KS a nice percentage.
Your hair look like poop, Bob! - Wanker.
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.
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.
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?)
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?
EOM. End of Story.
Revealed: The secret that other startups hate!
Fuck you Slashdot, where has my intelligent news feed gone?
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.
Because startups are cool. Like fezzes.
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.
If you disagree, post your argument. (-1, Overrated) isn't your personal censorship tool for views you don't like.