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It'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 V
by nylonstrung 3y ago
It'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.