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You'd think that, but the percentage of failure I've personally witnessed tells me there's profit in the write-offs, too. ETA: In the venture capitalist realm,
by Damogran6 8y ago
You'd think that, but the percentage of failure I've personally witnessed tells me there's profit in the write-offs, too.
ETA: In the venture capitalist realm, I hear you fund 10 businesses with the hope that one of them strikes it rich.
- Ntrails 8y agoVC is equity not debt, and very very few restaurants raise money via equity. Often they'll take out large loans secured on both house and business, along with a chunk of their own (or investor/friends) money to get things started. The lenders get to stick nice chunky rates on the whole thing and generally have limited downside because collateral. I don't mean to imply the banks are doing anything wrong, just that the business model is based on managed downside rather than "striking it rich"
- wgerard 8y agoMinor nitpick which I can't let go because it's been on my brain lately: VC is not always equity, especially in the early stages of a company. Convertible notes are debt instruments (and SAFEs are warrants). They convert to equity eventually, so you are of course correct in the long run (and why it's a nitpick). But until that happens your investors are debt holders.
- aml183 8y agoCorrect, but I would say it's next to impossible to find a VC who treats a SAFE/Convertible Note as debt. Nobody wants it paid off, the VC will always choose to convert to equity because that is the VC's model.
- Ntrails 8y agoIt's a nitpick - but both valid and interesting (I've never worked in startups and did not know that VCs commonly bought convertible notes)