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> Saying debt and equity are equally valid suggests that you should be fine with a 100% equity financed company, which is completely false. I assume you mean 1
by eru 1y ago
> Saying debt and equity are equally valid suggests that you should be fine with a 100% equity financed company, which is completely false.
I assume you mean 100% debt financed?
In any case, that's also mostly fine and happens in practice. As soon as that dips above 100%, conceptually your creditors turn into shareholders.
- mamonster 1y agoNo, I meant equity. If you are not using significant (20%+ of capital at a minimum)debt in your capital structure, you are almost guaranteed to be making a financial mistake.
- eru 1y agoIt depends on your industry and stage of your company and jurisdiction. Many software startups run with 100% equity, and I don't think they are all idiots. A pet peeve of mine is people complaining about too much leverage, but then not doing anything about the tax systems making debt financing cheaper compared to equity.
- eru 1y agoP.S. Some companies even have more than 100% equity. In a sense: when their market capitalisation exceeds their enterprise value.