Why dont tech companies use this method and why do they need VC funding instead. Because they need more money than banks are willing to lend, their present cir

Why dont tech companies use this method and why do they need VC funding instead. Because they need more money than banks are willing to lend, their present circumstances do not imply collateral/predictable revenues/etc which would justify an underwriting decision to lend more, and their implied failure rates would make lending at commercially acceptable interest rates a prohibitively expensive proposition for the bank. For example, take stock of two guys in their mid-twenties with $30k of their $40k combined net worth tied into a business. The business has proven revenues of $10k. They seek $2 million in capital to expand to their next milestone. No bank in its right mind will loan them $2 million -- they're literally incapable of making the interest payments on it, to say nothing of predictably paying it back. By comparison, a VC firm might assign a notional value to their business of $3 million (the bank would say "It's, literally, worthless: liquidation costs swamp accumulated value of capital."), put in $2 million and own 40% of the company, and see 10 similarly situated investments fail totally to sell this one company for $200 million 5 years from now.