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The VCs don't "owe" money to the startups: they "buy" equity with their money. The VCs aren't "out" the money deposited by the startup at SVB; that money was a
by egl2021 4y ago
The VCs don't "owe" money to the startups: they "buy" equity with their money. The VCs aren't "out" the money deposited by the startup at SVB; that money was already exchanged for equity in the startup.
The VCs aren't happy because they and the startup both expected that the money-equity exchange meant that the startup would have working capital, so potentially the value of the equity that they got has fallen. This is a problem for both parties.
- 6d6b73 4y agoYes they buy equity but do they always pay upfront? I would imagine that they have some contracts structured in a way that allows them to pay in rates based on performance etc. Also, what if some vc signed contract last week with payment due this week and they can't pay. I dont expect a lot of cases like that but i suspect few did.