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This might be true for Silicon Valley but for most startups elsewhere this certainly isn't the case. In most places equity simply isn't as readily available so

This might be true for Silicon Valley but for most startups elsewhere this certainly isn't the case. In most places equity simply isn't as readily available so you basically have no choice but to take out a loan if you want to found a company that isn't cash flow positive from day one. Besides, founders - at least where I live - are required to act as guarantors for such loans. So, no in most places you can't just walk away from a failed startup.

tptacek 14y ago
If by "startup" we mean "technology company" I feel comfortable arguing that if "most" companies aren't in Silicon Valley (in fact they probably are), they are at least mostly in the US, where equity financing for startups is the rule, not the exception. In the US, it is very difficult to get bank debt financing for startups, for the same reason that service providers price your imminent demise into their contracts.
- BjoernKW 14y ago
  'Startup' doesn't necessarily imply 'technology company'. For example, some run-of-the-mill restaurant certainly isn't a startup in my opinion but a brick and mortar store offering a unique product or concept could very well be considered a startup. One could in fact argue that the most influential tech companies are located in Silicon Valley. However, in terms of sheer numbers I daresay most startups are actually founded outside the US. Just consider the huge amount of medium-sized enterprise IT companies that offer some essential service or product that no one probably has ever heard of. I'd certainly consider those to be startups (when they were founded, that is), not of the sexiest variety, but startups nonetheless.
  - tptacek 14y ago
    Sure. We can just stipulate though that by "startup" I mean "US technology company".
csense 14y ago
The comparison between personal-debt-funded education and personal-debt-funded failed startups still makes the latter look like a better deal. I believe educational loans in the US can't be discharged by personal bankruptcy. So if you go into debt personally to fund your startup, all you can lose is everything you have. OTOH if you borrow money to pay for college, your creditors can take everything you have -- and money you haven't earned yet. I'd never fund a startup with personal debt. Although with mortgage tax breaks and the interest rate climate the way it is, it is actually kinda tempting...

tptacek 14y ago

If by "startup" we mean "technology company" I feel comfortable arguing that if "most" companies aren't in Silicon Valley (in fact they probably are), they are at least mostly in the US, where equity financing for startups is the rule, not the exception. In the US, it is very difficult to get bank debt financing for startups, for the same reason that service providers price your imminent demise into their contracts.

BjoernKW 14y ago
'Startup' doesn't necessarily imply 'technology company'. For example, some run-of-the-mill restaurant certainly isn't a startup in my opinion but a brick and mortar store offering a unique product or concept could very well be considered a startup. One could in fact argue that the most influential tech companies are located in Silicon Valley. However, in terms of sheer numbers I daresay most startups are actually founded outside the US. Just consider the huge amount of medium-sized enterprise IT companies that offer some essential service or product that no one probably has ever heard of. I'd certainly consider those to be startups (when they were founded, that is), not of the sexiest variety, but startups nonetheless.
- tptacek 14y ago
  Sure. We can just stipulate though that by "startup" I mean "US technology company".

csense 14y ago

The comparison between personal-debt-funded education and personal-debt-funded failed startups still makes the latter look like a better deal. I believe educational loans in the US can't be discharged by personal bankruptcy. So if you go into debt personally to fund your startup, all you can lose is everything you have. OTOH if you borrow money to pay for college, your creditors can take everything you have -- and money you haven't earned yet. I'd never fund a startup with personal debt. Although with mortgage tax breaks and the interest rate climate the way it is, it is actually kinda tempting...