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I mean, it's not free money. The people who gave them the money expect to get the money back plus some profit. Whatever fancy financial words people like to dol
by coldpie 3y ago
I mean, it's not free money. The people who gave them the money expect to get the money back plus some profit. Whatever fancy financial words people like to doll that up with, it still sounds to me like debt.
- nylonstrung 3y agoIt's literally not debt. Debt is when you borrow money or issue bonds with obligation to repay the principal, plus interest This is an equity investment: the VCs buy an ownership stake in the company, which they share with the founders. They don't receive "profit"- they get a payout proportion to their ownership stake if the company is sold or retained earnings if the company issues dividends (not common) Source: I'm a founder and former VC.
- coldpie 3y agoI understand, but it doesn't seem like an interesting distinction to me. It's all just different financial ways to say the same thing: they got money from someone and will be expected to pay it back with even more on top somehow later.