4 ms·

Is it really wise to invest in companies that depend on loans from the US Govt to operate? I'm not too sure. I've been pretty impressed with BYD: http://en.wik

by jakarta 16y ago

Is it really wise to invest in companies that depend on loans from the US Govt to operate? I'm not too sure. I've been pretty impressed with BYD: http://en.wikipedia.org/wiki/BYD_Company http://en.wikipedia.org/wiki/BYD_Company At the very least, with BYD you have the chance to get one of the world's leading manufacturers of batteries as downside protection in case the automobile business does not pan out.

gte910h 16y ago
Is it really wise to invest in companies that require venture capital to operate? A loan is merely one way of getting funding.
- jakarta 16y ago
  There's a big difference between getting VC funding and getting a loan from the US Govt. The US Govt is going to be more likely to loan to businesses where the underlying economics just aren't there -- which is why the private sector is unwilling to fund the business. Also, I think it is incorrect to equivocate equity investing with debt funding. When you are making a loan, you are mostly betting on the survival of the business. If they survive long enough to pay back your loan, with interest, it is a win for you (the lender). When you are investing in the equity you are actually owning a piece of that business and the future cash flows that come to it. In that sense, you are betting not only on its survival but also its ability to thrive.
  - dasil003 16y ago
    The US Govt is going to be more likely to loan to a business..." This seems like a poor way of making investment decisions. The fact that a VC invests in a company might be a good reason to look at the company, but it shouldn't be the most significant data point. Government loans are even less relevant. You yourself say: When you are making a loan, you are mostly betting on the survival of the business. Yeah, so what does that say about the growth potential of the company? Less than nothing. In fact, you could make the argument that the board is so bullish on the future of the company that they preferred loans to VC because they give up less upside.
  - gte910h 16y ago
    > The US Govt is going to be more likely to loan to businesses where the underlying economics just aren't there Dot com boom? Something like 30-60% of venture backed businesses outright fail, and only 5-17% are hits. I'd say you're not looking for a much better outcome on venture funding being a predictor of 'how well the economics are there' Truth is, governement loans + earlier IPO lets them keep tons more equity, and allows more measured growth (both of which are important when creating real world products, as opposed to electronics/software, which have a smaller manufacturing footprint than say, experimental cars). The transmission issues alone would have been hideous to deal with under a VC.

by jakarta 16y ago

gte910h 16y ago

Is it really wise to invest in companies that require venture capital to operate? A loan is merely one way of getting funding.

jakarta 16y ago
There's a big difference between getting VC funding and getting a loan from the US Govt. The US Govt is going to be more likely to loan to businesses where the underlying economics just aren't there -- which is why the private sector is unwilling to fund the business. Also, I think it is incorrect to equivocate equity investing with debt funding. When you are making a loan, you are mostly betting on the survival of the business. If they survive long enough to pay back your loan, with interest, it is a win for you (the lender). When you are investing in the equity you are actually owning a piece of that business and the future cash flows that come to it. In that sense, you are betting not only on its survival but also its ability to thrive.
- dasil003 16y ago
  The US Govt is going to be more likely to loan to a business..." This seems like a poor way of making investment decisions. The fact that a VC invests in a company might be a good reason to look at the company, but it shouldn't be the most significant data point. Government loans are even less relevant. You yourself say: When you are making a loan, you are mostly betting on the survival of the business. Yeah, so what does that say about the growth potential of the company? Less than nothing. In fact, you could make the argument that the board is so bullish on the future of the company that they preferred loans to VC because they give up less upside.
- gte910h 16y ago
  > The US Govt is going to be more likely to loan to businesses where the underlying economics just aren't there Dot com boom? Something like 30-60% of venture backed businesses outright fail, and only 5-17% are hits. I'd say you're not looking for a much better outcome on venture funding being a predictor of 'how well the economics are there' Truth is, governement loans + earlier IPO lets them keep tons more equity, and allows more measured growth (both of which are important when creating real world products, as opposed to electronics/software, which have a smaller manufacturing footprint than say, experimental cars). The transmission issues alone would have been hideous to deal with under a VC.