VCs make nearly all their returns off a few big hits. So on the big hit, they will certainly:
1) make > 150k.
2) Sell out instantly, or at the very least in chunks considerably bigger than 150k. Even if they do sell out in 150k chunks, that will drastically reduce their returns - returns = log(outcome/investment)/t, so increasing t will lower returns.
3) Return the funds to investors.
Sounds like this law will, in fact, cut returns by roughly 50%. Or maybe 30% if the exit takes a long time.
VC are companies, not people, so what they earn is counted as benefits, not revenue. Moreover, in their P&L, they can subtract the L from their P, and average their money streams over several years.
There are legitimate issues with this law:
* it creates a lot of gratuitous bureaucracy and complexities, where you need to apply to some byzantine exceptions to the exception to the common law to keep a decent share of the wealth you produced; this kind of unproductive BS drives genuine entrepreneurs crazy and disincentivize them, probably more than the tax bracket in which they fall;
* it creates a very legitimate sense of insecurity among small businesses;
* it sends an overall message that France is not a startup-friendly environment, and that if you can help it, you should rather incorporate in another European country.
This last message is, unfortunately, very true: both the corporate and political French elites come from the same few schools, mostly ENA; so politicians have many executive friends in the private sector, but they all only worked in huge companies. They wish that the next Google would appear in France, but they can't realize that Google-like wealth creation never comes from dinosaurs on the scale of AT&T or GM (or Orange, or Peugeot). Moreover, this cluelessness is shared by conservatives and liberals equally.
There is no conservative/liberals differenciation in France. All French senior politicians and civil servants have exactly the same life trajectory, are educated in the same school, ENA, and share the same values. There is a lot of opportunist movement from a party to another, showing that party ideology has zero weight.
PS: you may bring Nicolas Sarkozy as a counter-example. He, indeed, did not go to ENA because he failed to graduate from IEP Paris, which is a prerequisite.
No. A VC fund invests each dollar precisely once and then attempts (over the next 10-15 years) to return those funds to investors when they cash out.
Maybe VCs in France will completely restructure their business to avoid this massive tax (presumably incurring lower returns in the process). Or maybe they will just invest outside France. Either way, this is not a small problem for them.
Money is fungible and people are creative; My expectation is that, in the middle-run, that they will be make this no more than a small problem for them.
What are their investors doing with the money? If they intend to pile up a bunch of dollars and swim in it like Scrooge McDuck, then yes, that pile might shrink as a result of this law, but I expect that represents a relatively small fraction of institutional VC money.
As the parent said, if they sell to retire, the income isn't taxed so highly; if they sell to cash out of this investment and put (at least 80% of) it into something else, then the money is being reinvested, and hopefully can be handled as such in the accounting.
1) make > 150k.
2) Sell out instantly, or at the very least in chunks considerably bigger than 150k. Even if they do sell out in 150k chunks, that will drastically reduce their returns - returns = log(outcome/investment)/t, so increasing t will lower returns.
3) Return the funds to investors.
Sounds like this law will, in fact, cut returns by roughly 50%. Or maybe 30% if the exit takes a long time.