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i will warn anyone against taking on convertible debt or government backed debt while also investing your own time and money in a company. i have been through t

by b20000 5y ago

i will warn anyone against taking on convertible debt or government backed debt while also investing your own time and money in a company. i have been through this experience and sooner or later the debt will mature. this could mean that you lose all the IP you developed and the money invested. tread carefully. i have also tried to raise debt against considerable IP assets (not patents but actual implementations and products) and was never able to do that. this remains a huge opportunity to this day. raising debt against real estate or other traditional assets is nothing new and no point in writing an article on that. i would personally never borrow against my home no matter how much i believe in my company as there is always the unexpected event that can f** up everything.

candiddevmike 5y ago
I've been in this exact same situation and it is a real struggle. Banks and the SBA are incredibly useless when it comes to loans for startups/small tech companies, especially the clueless loan approval folks. Supposedly there are a number of government grants meant to help tech companies secure financing without taking on insurmountable debt, but I have yet to find them.
- irjustin 5y ago
  > Banks and the SBA are incredibly useless when it comes to loans for startups/small tech companies I mean isn't that the point? Banks loan money for low risk which is why they're able to offer those low rates. Small usually means risky, not always, but definitely the default.
  - candiddevmike 5y ago
    Not necessarily, it's about collateral. Banks want real assets, not IP, which they value at 0. This isn't really the case though, it's just they don't know how to valuate it. Sure, it may be close to 0 in certain cases, but if someone with a collection of garage sale knick knacks can get a loan to open a flea market with their inventory as part of the collateral, why can't I with just IP?
    - duped 5y ago
      It's a lot harder to find someone to buy IP than baseball cards
      - candiddevmike 5y ago
        Here's an idea: government backed loans for tech companies, and if they fail, the government gets the IP and releases it under some kind of FOSS license. Seems like a win-win.
        b20000 5y ago
        what if the govt lends you 100k but you spent 500k of your savings and time? now they own a 600k asset that nobody needs to pay you for using.
        brianwawok 5y ago
        What’s the IP worth of most failed startups? The code is a bunch of calls to other GPL libraries. The code has 0 value until people pay to use it.
        b20000 5y ago
        that assumes there is no value in integrating code. actually, from my experience, that is where the value is. how you put into practice components to solve a new problem or offer a new way to do something people are willing to pay for.
        duped 5y ago
        Not sure how much of a win that is for the taxpayers. You loaned someone hundreds of thousands for something that no one found value in, but at least it's open source? A better use of public money is funding industries with high capital requirements for straight equity. I'd rather we build fabs for Intel and AMD in the Great Lakes region with federal money in exchange for stock where the returns can go to pensions.
  - b20000 5y ago
    but the rates are not low. AND… in the case of SBA or govt programs from other countries the debt comes with restrictions which will hamper your ability to be succesful.
    - irjustin 5y ago
      > but the rates are not low What are you comparing to? If you've shopped around for interest rates you'll know a bank loan is the lowest of the generally accessible loans. More specifically mortgages are the easiest low rates because they're very predictable (compared to other assets).
- daniel-cussen 5y ago
  Well so there's actually tons of wannabes with IP that isn't worth anything. Tons and tons and tons. How do you differentiate between them and the real deal? If you can differentiate, why are you still a retail banker?

by b20000 5y ago

candiddevmike 5y ago

I've been in this exact same situation and it is a real struggle. Banks and the SBA are incredibly useless when it comes to loans for startups/small tech companies, especially the clueless loan approval folks. Supposedly there are a number of government grants meant to help tech companies secure financing without taking on insurmountable debt, but I have yet to find them.

irjustin 5y ago
> Banks and the SBA are incredibly useless when it comes to loans for startups/small tech companies I mean isn't that the point? Banks loan money for low risk which is why they're able to offer those low rates. Small usually means risky, not always, but definitely the default.
- candiddevmike 5y ago
  Not necessarily, it's about collateral. Banks want real assets, not IP, which they value at 0. This isn't really the case though, it's just they don't know how to valuate it. Sure, it may be close to 0 in certain cases, but if someone with a collection of garage sale knick knacks can get a loan to open a flea market with their inventory as part of the collateral, why can't I with just IP?
  - duped 5y ago
    It's a lot harder to find someone to buy IP than baseball cards
    - candiddevmike 5y ago
      Here's an idea: government backed loans for tech companies, and if they fail, the government gets the IP and releases it under some kind of FOSS license. Seems like a win-win.
      - b20000 5y ago
        what if the govt lends you 100k but you spent 500k of your savings and time? now they own a 600k asset that nobody needs to pay you for using.
      - brianwawok 5y ago
        What’s the IP worth of most failed startups? The code is a bunch of calls to other GPL libraries. The code has 0 value until people pay to use it.
        b20000 5y ago
        that assumes there is no value in integrating code. actually, from my experience, that is where the value is. how you put into practice components to solve a new problem or offer a new way to do something people are willing to pay for.
      - duped 5y ago
        Not sure how much of a win that is for the taxpayers. You loaned someone hundreds of thousands for something that no one found value in, but at least it's open source? A better use of public money is funding industries with high capital requirements for straight equity. I'd rather we build fabs for Intel and AMD in the Great Lakes region with federal money in exchange for stock where the returns can go to pensions.
- b20000 5y ago
  but the rates are not low. AND… in the case of SBA or govt programs from other countries the debt comes with restrictions which will hamper your ability to be succesful.
  - irjustin 5y ago
    > but the rates are not low What are you comparing to? If you've shopped around for interest rates you'll know a bank loan is the lowest of the generally accessible loans. More specifically mortgages are the easiest low rates because they're very predictable (compared to other assets).
daniel-cussen 5y ago
Well so there's actually tons of wannabes with IP that isn't worth anything. Tons and tons and tons. How do you differentiate between them and the real deal? If you can differentiate, why are you still a retail banker?