"Menlo Managing Director H. DuBose Montgomery says the 1999 fund “has not completed its performance cycle and has several promising portfolio companies with large revenues, which are still private.”"
If this is true, maybe part of a solution is for fund investors to not have to wait for an IPO or acquisition in order to start receiving a return?
I don't see how they can get a return if there is no IPO or acquisition. The main assets of a startup is the technology, the IP, the business plan, the executive team as well as the staff, consumers & customers, which are not liquid. I've heard about specialized stock exchanges for startups (there's one in ontario), but apart from that, i don't see any solution.
Dividends, especially with the current capital gains tax rates, are a wonderful solution. This assumes your investors can be patient enough to receive them.
I think dividends are interesting for certain classes of startups, particularly during downturns. In boom periods, VCs follow the "dumping" principle. Dump your product for free to as many users as possible to get market share and drown out competitors with a lessor war chest. In a downturn, there should be less of this and more opportunity for businesses to focus on traditional evolution; i.e. getting to profits.
Perhaps we need a new class of VC to accomplish this. Invest in sizes more like an angel but with clear nearer-term profit agenda.
I think the most meaningful "asset" for a newco is "customers willing to pay for a product or service". For most Internet startups, the tech isn't that novel or patentable.
I do not think you need an open exchange to give returns to your investors: "Think Simple".
These sorts of of articles are never a good sign since in any ponzi^H^H^H^H^H investing scheme, delusion^H^H^H^H^H^H confidence is important. These kind of articles reinforce the reality they are describing, at least, they have the potential to do so.
If this is true, maybe part of a solution is for fund investors to not have to wait for an IPO or acquisition in order to start receiving a return?