Overview
- Grover questioned Kamath’s framing on X, arguing a dividends-versus-capital-gains lens oversimplifies how founders, investors and operating realities drive decisions.
- Kamath contends dividends face roughly 52% effective taxation versus about 14.95% for capital gains, incentivising minimal reported profits and cash burn to boost valuations before exits.
- He says scarce M&A options and VC fund lifecycles push startups toward IPOs around 7–8 years after first funding, often before they reach profitability.
- Kamath argues markets award much higher multiples to rapid, unprofitable growth (around 10–15x) than to slower, profitable growth (about 3–5x), amplifying exit gains.
- Warning that such firms may lack resilience in a downturn, Kamath’s critique and Grover’s rebuttal unfold during a busy IPO pipeline with no policy changes announced.