Because New Technological Corporations tend to be built around a single (or small number of) fundamental ideas and since the technological leverage of this idea allowed the company to grow without large infusions of capital which would dilute the ownership interests of the founders and early equity investors, a New Technological Corporation is far more likely than most companies to retain, at maturity, a significant ownership percentage by founders.
Founders of such a company will have seen their original investment multiplied thousands to millions of times; they will have attained substantial wealth through appreciation of their original stock holdings. However, as one founder of Autodesk puts it, ``They don't take stock at Burger King''. So in order to diversify holdings to prevent all of one's wealth being concentrated in a single company--even to see any cash at all from appreciated stock, one must sell stock on the open market. Clearly, any sane founder can be expected to sell some portion of his stock to achieve diversification he can sleep with, but after that point founders often find themselves faced with balancing the desire to retain most of their stock holdings, both to continue to exert influence on the destiny of the company and because they believe the stock a superb long-term investment, and the inclination to sell a portion of their holdings and put the proceeds into income-generating securities.
It is clearly in the interest of any business for founders to retain a significant ownership position. Not only does the company benefit from having a substantial portion of its stock owned by people with an intimate understanding of the company's history and strategy, the founders' stock, being unlikely to be sold capriciously or tendered in a hostile takeover, provides price stability and gives management more freedom to act in the best interests of the company than it would have were all the stock in the hands of institutional investors concerned only with the next quarter's earnings. In a New Technological Corporation where the founders may include some of the Wild Talents whose efforts led to the success of the company, the rationale for maintaining their close involvement is even more obvious.
Adopting a policy of regular dividend payments can significantly reduce the founders' dilemma regarding their stock holdings. Even a modest dividend can generate annual income for founders comparable to the proceeds from the sale of the fraction of their holdings typically liquidated in a year by founders, and much greater than the income yielded by investing those proceeds. Dividends create an incentive for founders to retain their holdings in the belief that the company's future will result in their continued appreciation, without thereby foregoing current income from the capital invested in the venture.
Editor: John Walker