I recall a conversation with Alok on this topic, on the day the budget was presented. The Economic Times has an article today that outlines the issue, but presents no clear resolution one way or another. Would some of the knowledgable folks here comment?
The worst isn’t over for venture capital funds (VCFs). The million-dollar question before funds now is the rate at which their earnings will be taxed. Will it be 10% that stock investors pay on “capital gains” or, will the IT assessing officer use his discretion and treat the earnings as “business income” and slap a 30% tax?
There is no straight answer to this: while one may argue that VCFs buy stocks with the clear purpose to invest and hold on for a few years, it is also perceived that trusts are set up for the “business of investment” and hence what they earn is business income.
More so, since VCFs invest in unlisted stocks, where long-term gains are also taxed. A 30% tax could deal a body blow to VCFs, making them significantly less attractive as invesment vehicles. The tricky issue has cropped up even as funds are finding it difficult to come to terms with the new proposal that brings most VCFs under the tax net.
- Mary Meeker’s 2014 Internet Trends report - May 28, 2014
- Andreessen-Horowitz raises $1.5B for its new fund - February 1, 2012
- WestBridge launches India “evergreen” fund - November 15, 2011
Oops…sorry for the type…read the first sentence in the previous comment as
Do *opinions* become *facts* by individual classification ? –
Do *Opinions* don’t become *facts* by individual classification ? Don’t they call for iterations, wider acceptance and deeper understanding to support your POV ? Wouldn’t you agree broad familiarity and deeper understanding of subtle nuances are two different things ? I for one think facts are not hurried into, need more checking out.
*VC & PE belong to the same asset class is a given truth in the industry*, is it so ? – Show me one other guy who says so. I’d like to hear more on that since that would be quite a revelation and I’d be damned if I don’t correct myself after reading that – need not be addressed to me ( am too tiny). Even any published article would do.
I referred my discussion with Ted, on international VC expansion, after you linked to his interview on the same topic.
In my discussion, Ted himself admitted that KPCB was not very sure if valley firms could be successful at investing internationally. Another partner at KPCB has gone public with that view.
So I was referring to a conversation with an individual who you first quoted in our discussion on the same topic as that of my conversation. That’s all. If you want to see this as name dropping, so be it.
On the other comment, that VC & PE belong to the same asset class is a given truth in this industry (public equities are different, though). You seem to be adamant on the opposite view, so I really can’t say much if my attempt to get you to reconsider your view gets slammed as “what are you talking about?”. As a VC/PE professional, I’d like to do my bit to help people with an interest in the industry to understand this industry (that’s in everyone’s best interests), so maybe I go too far when somebody gets the facts wrong (I am not talking of opinions, but facts – so you either have it right, or you don’t have it right).
Your point at (b) is an incorrect assessment. I hardly had run on those lines.
While engaging in a debate if we often come across “I know so & so ( so you better shut up), I’ve been there and done that ( what are you talking about ? )”, instead of new insights that we look for, we get tired. That was the hint about rolodexes.
So has been the case of `discerning reader’ – authors of mature articles and features often presume a certain level to pitch from. They don’t elaborate the obvious (basics) – has been my point.
I am out. Just wanted to straighten this bit.
I quote from an earlier post – “lot of points you mention (franchise model, risk/ return profile) are actually not true.” Nowhere does that mean that the franchise model does not exist. It just doesn’t have the impact on the risk /return profile that you say exists. And Ted’s article also merely talks of the model, but has no commentary on impact on financial return model. So that is not relevant to our discussion.
a) KPCB is fantastic at lot of things; doesn’t mean that they are good at everything and everything they say needs to be respected. Are they gods at finding the right startup / team in sillicon valley? Absolutely. Do they have any international investment experience? In that respect, they lag behind lot of other peers in the industry. How many days have John D/ Ted / Ajit Nazre spent in India / China? So any view that KPCB has on international investing, I’d dig deeper into that instead of accepting as gospel truth.
b) Thank you for telling me that caught between rolodexes etc, I am fatigued, that I understand more than I think I do and that I lack the sophistication of discerning readers such as yourself. I’ve no such observation on you, simply because I’d rather stick to the topic, than make any such personal comments.
c) I did accept your right to disagree three posts ago, but you continued. Glad we finally agreed on that.
Ashish.