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"debt is what makes you file for bankruptcy" This is true, but taking on debt, as in, borrowing money, is not the only way to end up with more debts than you c
by ajb 3y ago
"debt is what makes you file for bankruptcy"
This is true, but taking on debt, as in, borrowing money, is not the only way to end up with more debts than you can pay. For example, I worked at a startup which ended up having a bunch of debts to retailers, because they sold physical product via retailers and retailers always put the risk on the vendor.
Of course, your typical SAAS won't end up there, but VCs do fund other business models.
- te_chris 3y agoEasy enough even for saas: a few big enterprise contracts for services the company uses plus a wage bill that’s less than revenue will sink a company quickly enough.
- ajb 3y agoTrue, however in many jurisdictions the employer has an obligation not to "crash out" and leave employees without their last month's salary, except when this is due to unforseen circumstances. They should wind down the company in an orderly way before it gets to that point
- nine_zeros 3y agoIt happens for SAAS, even for large public SAAS. It's called receivables on the balance sheet. That money may or may not show up. It usually does but it is not a guarantee since the customer can renege or default.
- paulddraper 3y agoYes, it's possible to have more receivables than assets.