4 ms·

That capital doesn't have to be reflected as a percentage of ownership does it? What if they were structured as loans to the company which are paid back with in

That capital doesn't have to be reflected as a percentage of ownership does it? What if they were structured as loans to the company which are paid back with interest separate from dividend payments from ownership? Then people who "invest" financially into the company still get rewarded for it, but they can't just buy up all the profits with an ownership position. I'm not deep into this area, so I don't know what sort of regulatory (or otherwise) hurdles this approach would face.

spywaregorilla 4y ago
It does not. You can make whatever terms you want. You don't need to contribute any capital to get a share.
gruez 4y ago
>That capital doesn't have to be reflected as a percentage of ownership does it? What if they were structured as loans to the company which are paid back with interest separate from dividend payments from ownership? Why would anyone want to invest in a highly risky venture (ie. immature tech companies) with capped upside? It's the same reason why VC companies want equity, not debt obligations in return for their investment.
- tstrimple 4y ago
  Presumably because they believe in the model. The upside comes from the cooperative ownership. Clearly this isn't intended to attract VCs, but to encourage financial investments from existing employee owners.
  - deleted 4y ago
    [deleted]
  - gruez 4y ago
    Okay, but why would I want to buy $10k worth of junk bonds from the scrappy startup where I work at? A normal person who wants better returns than t-bills or investment grade bonds buys equities, not junk bonds. Sure, that loan might help the startup to succeed in its mission and therefore net me more profit, but it suffers from the free rider problem. Everyone in the business benefits if it succeeds, but if it fails you experience 100% of the losses. Why would anyone want to invest more than the minimum/average amount?

spywaregorilla 4y ago

It does not. You can make whatever terms you want. You don't need to contribute any capital to get a share.

gruez 4y ago

>That capital doesn't have to be reflected as a percentage of ownership does it? What if they were structured as loans to the company which are paid back with interest separate from dividend payments from ownership? Why would anyone want to invest in a highly risky venture (ie. immature tech companies) with capped upside? It's the same reason why VC companies want equity, not debt obligations in return for their investment.

tstrimple 4y ago
Presumably because they believe in the model. The upside comes from the cooperative ownership. Clearly this isn't intended to attract VCs, but to encourage financial investments from existing employee owners.
- deleted 4y ago
  [deleted]
- gruez 4y ago
  Okay, but why would I want to buy $10k worth of junk bonds from the scrappy startup where I work at? A normal person who wants better returns than t-bills or investment grade bonds buys equities, not junk bonds. Sure, that loan might help the startup to succeed in its mission and therefore net me more profit, but it suffers from the free rider problem. Everyone in the business benefits if it succeeds, but if it fails you experience 100% of the losses. Why would anyone want to invest more than the minimum/average amount?