Taxing Capital

Published: 10/30/2008 4:28:04 PM, comments: 789

This is probably my one and only political post (this year at least). It pertains to the taxing of capital, or more precisely, the possibility of increasing the tax on capital and capital gains.

Study after study has shown that when the government taxes something, it generally disincentivizes the activity related to that tax. An increase in the tax on capital, through capital gains tax law changes proposed by Barack Obama and other Democrats, will result in a reduction of the employment of that capital and related economic activity.

Regardless of other consequences associated with higher capital gains taxes, don't be fooled. Capital gains tax increases will result in a reduction of capital investment.  Vote for the party that is capital friendly.

Don Jones


It's the Entrepreneur...

Published: 10/22/2008 3:08:00 PM, comments: 0

I really like this quote from Paul Graham, co-founder of Y-Combinator, a start-up incubator of sorts:

Paul Graham says "If we've learned one thing from funding so many startups, it's that they succeed or fail based on the qualities of the founders."  "Which means that what matters is who you are, not when you do it."

If you are thinking about starting up a technology company, try to minimize your concerns about the current economic environment. The only thing constant in this world is change, and sometime in the near future the economy will turn up. If you are waiting until then to start your company, you'll be behind others who are starting theirs now.


Don Jones


Capital is Getting More Expensive

Published: 10/15/2008 3:17:36 PM, comments: 0

With the recent financial market meltdown, many participants in the venture capital industry are noticing that the cost of capital is going up, sometimes very steeply.

Here's a quote from Fred Wilson, Internet company VC:

"...the venture capital and related debt markets have been impacted by what has gone on in the past month. I am seeing it every day in our portfolio and in the investment opportunities we look at. Financings are blowing up, terms are being renegotiated, venture lenders are getting more conservative, and existing investors are stepping up to fill the gaps. The good news is that a lot of companies, and many in our portfolios, have raised money recently and have a good amount of cash on hand. Many of those companies who are flush with cash are cutting burn rates and making sure the cash lasts even longer."

Essentially as capital has become more scarce, the cost of obtaining it for startup companies to large Fortune 50 Enterprises has gone up dramatically. Valuations that VCs are will to pay for companies are dropping.

What to do? Obviously getting your company further along in its development will help increase your valuation. Getting to cash flow breakeven or profitability will reduce risk for a potential investor.

The days of getting funding with barely a prototype are gone for the foreseeable future. So do whatever you can to make your company look bigger and further along.


Don Jones


Tough Times? Buck It Up!

Published: 10/8/2008 12:35:47 PM, comments: 0

I came across this blog post from prominent Internet VC Brad Feld and I hope you are inspired by it - whether you are an entrepreneur or corporate executive:


Don Jones


Venture Capital and the Credit Crunch - Other Voices

Published: 10/1/2008 7:14:11 AM, comments: 1

Don Jones
CEO, VentureDeal

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