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> 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

> 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
        i doubt that components for consumer electronics can be made cheap enough manufacturing them in the US. you just never are going to be able to make a TV for $150 in the US. it’s a pipe dream made up by politicians. and why the great lakes? pollute the beautiful nature in minnesota and surroundings? also, VCs just follow trends and don’t understand many industries. no VC or angel funding does not mean anything.
        duped 5y ago
        Cheap power and plentiful freshwater supply that can be utilized renewably (fabs don't capture water like say, agriculture). There are multiple fabs in the US today making components for consumer electronics as well as multiple fabs under construction. Government incentives are a major factor in choosing sites for these projects, we know we need more of them domestically, and know we can make a buck off them for the taxpayer.
        b20000 5y ago
        AMD in sunnyvale is a superfund site and there have been occurences there of people with birth defects.
- galaxyLogic 5y ago
  Because it is uncertain if the IP will bring in any money -- because it has not done so in the past so far, has it?. If you can show you're already getting some revenue out of the IP then I think you will have a good chance with the banks. They like existing businesses with existing cash-flow. Garage sales typically bring in some value or at least the value of the goods is relatively easy to evaluate. Not so with IP.
  - bombcar 5y ago
    The way would be to show you have a company willing to purchase the IP at a certain amount, and borrow against that - but if you have that just get that company to invest. The dirty secret the banks know and the startups don’t want to admit is that much IP is worthless.
    - b20000 5y ago
      ever heard of “not invented here”? even if you have valuable IP big tech companies think they can do better even if they cannot, or are simply greedy and will spend a multiple of what your IP costs just so they don’t need to acquire you. that is what i’ve noticed. there is little logic or reason.
      - galaxyLogic 5y ago
        Keep in mind that "big companies" consist of many "small people". If you offer them the IP for sale any decision-maker in the company that could approve paying for it will need to ask themselves: "How much would this help my career in this company personally? Or does it put me in risk of possible failure? Does it put me in competition with our other departments? How much would we need to invest our own time and efforts to integrate this IP into our product-line?".
        b20000 5y ago
        great insight, thanks. so what is a smart way to go about this?
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).

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
      i doubt that components for consumer electronics can be made cheap enough manufacturing them in the US. you just never are going to be able to make a TV for $150 in the US. it’s a pipe dream made up by politicians. and why the great lakes? pollute the beautiful nature in minnesota and surroundings? also, VCs just follow trends and don’t understand many industries. no VC or angel funding does not mean anything.
      - duped 5y ago
        Cheap power and plentiful freshwater supply that can be utilized renewably (fabs don't capture water like say, agriculture). There are multiple fabs in the US today making components for consumer electronics as well as multiple fabs under construction. Government incentives are a major factor in choosing sites for these projects, we know we need more of them domestically, and know we can make a buck off them for the taxpayer.
        b20000 5y ago
        AMD in sunnyvale is a superfund site and there have been occurences there of people with birth defects.
galaxyLogic 5y ago
Because it is uncertain if the IP will bring in any money -- because it has not done so in the past so far, has it?. If you can show you're already getting some revenue out of the IP then I think you will have a good chance with the banks. They like existing businesses with existing cash-flow. Garage sales typically bring in some value or at least the value of the goods is relatively easy to evaluate. Not so with IP.
- bombcar 5y ago
  The way would be to show you have a company willing to purchase the IP at a certain amount, and borrow against that - but if you have that just get that company to invest. The dirty secret the banks know and the startups don’t want to admit is that much IP is worthless.
  - b20000 5y ago
    ever heard of “not invented here”? even if you have valuable IP big tech companies think they can do better even if they cannot, or are simply greedy and will spend a multiple of what your IP costs just so they don’t need to acquire you. that is what i’ve noticed. there is little logic or reason.
    - galaxyLogic 5y ago
      Keep in mind that "big companies" consist of many "small people". If you offer them the IP for sale any decision-maker in the company that could approve paying for it will need to ask themselves: "How much would this help my career in this company personally? Or does it put me in risk of possible failure? Does it put me in competition with our other departments? How much would we need to invest our own time and efforts to integrate this IP into our product-line?".
      - b20000 5y ago
        great insight, thanks. so what is a smart way to go about this?

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).