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That equity ends up being really expensive when unicorns ipo. Unicorns generally don’t raise non-convertible-debt because they simply can’t find lenders willing
by throwthere 5y ago
That equity ends up being really expensive when unicorns ipo. Unicorns generally don’t raise non-convertible-debt because they simply can’t find lenders willing to take single digit interest rates coupled with even a small chance of failure.
- rchaud 5y agoIsn't the expensive-ness an opportunity cost than a real cost? If I sell a 10% stake for $100m, my company is valued at $1bn. If I use that $100m towards growing the business, then both the 10% stake, and the remaining 90% grow in value. If a new investor wants a 10% stake, it's going to cost more than $100m. This is a very oversimplified example, so there are probably parts of the process where financial cost is incurred by the company. But I'm not sure where that happens.
- umeshunni 5y agoYes, but what if you could borrow $100M at 3% interest collateralized by $200M worth of your equity. Then, when you IPO, you just pay back the $100M * 1.03^t.