Question

2. Aaron Levie, one of the founders of the Internet file-sharing site Box, Inc. explained the difficulty the firm had in raising funds from investors:

“...investors had a hard time investing in a company where the founders acted 40, were 19 and looked 12. They thought we’d run off to Disneyland with the funding money.”

Source: Monica Langley, “Rich, but Not Silicon Valley Rich for Founders of Box,” Wall Street Journal, April 23, 2015.

Answer 1

The statement reflects the lack of confidence among the investors and it makes very difficult for them to invest in a particular firm that is specifically involved in internet based business. In this regards, the company has to come up with all the disclosures, as required by laws as well as voluntary disclosures along with the rating by the reputed rating agencies to generate confidence among the investors. The fear among the investors has been genuine as they have the sufferings in the recent cases and they are the last ones who are considered by the government agencies if they are not debt securities holder. Hence, it is important for the company to generate confidence among the investors.

The government should also take initiatives in terms of the regulatory measures or amendment to the already existing laws that make it stringent and investors can feel that their investments are safe. It will ease the environment and companies can raise funds.