but some sort of structure that would allow profit sharing, without requiring a path to IPO or acquisition, would be great
Wouldn't that structure be a corporation? Shareholders can take profits out of corporations as dividends thus allowing profit sharing without requiring an IPO or acquisition.
If Treehouse makes $10m profit per year then that can be issued as a dividend and if a VC owns, say, 30% of the company, that's $3m for them. Do that each year and you have a great, steady return (it could also be arranged that equity can convert into a loan in case the business doesn't reach its targets, thus protecting the investor.)
Hi Peter, thanks for your response. If you'll see below, my question is more on the practicalities of this (copied at the bottom of this comment.)
Personally, I'm not aware of any VCs in the "dividend business", but I'm by no means an expert so I could be wrong.
Also, if you are lucky enough to be successful and have over 500 employees/shareholders, my understanding is that the reporting requirements required by the SEC are so onerous that you might as well go public.
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Yep. That's really my question anyway - is there a path to victory as a non-bootstrapped startup that doesn't include IPO or acquisition. How would you structure things to where investors and employees are confident they would share in the ongoing rewards of a non-public company.
If you look at the headaches Zuckerberg is running into now, even with, ostensibly, "total control" over a public company, it just seems like an extraordinary distraction from keeping your users and employees happy.
Speaking of Facebook, there is also the issue they ran into with having over 500 shareholders and staying private. I'm assuming that there is some way to guarantee revenue sharing to employees without making them actual shareholders, so that you wouldn't step over the 500 employee threshold and trigger the SEC's required IPO - assuming you were lucky enough to get that big.
I'm being a little tongue in cheek because we do have the structures, it's just that the modern sort of VC we call 'investors' in these parts have a limited range, as you imply.
is there a path to victory as a non-bootstrapped startup that doesn't include IPO or acquisition. How would you structure things to where investors and employees are confident they would share in the ongoing rewards of a non-public company.
This question probably does make sense in the context of HN and the modern tech VC scene but the reason I was being tongue in cheek, again, was because across other industries and in most of the world for the past X hundred years, taking shares in businesses and then taking a cut of the dividends has been a main (though not only) way of making investments in smaller companies.
It seems like the modern tech scene is almost an aberration in this sense.
Wouldn't that structure be a corporation? Shareholders can take profits out of corporations as dividends thus allowing profit sharing without requiring an IPO or acquisition.
If Treehouse makes $10m profit per year then that can be issued as a dividend and if a VC owns, say, 30% of the company, that's $3m for them. Do that each year and you have a great, steady return (it could also be arranged that equity can convert into a loan in case the business doesn't reach its targets, thus protecting the investor.)