>>Unlike venture investors who typically bet one investment will hit big and compensate for duds, lenders get no upside if a startup succeeds.
Obviously not written by a lender. There are countless schemes for lending money. These are custom contracts, not credit cards. At the simplest, a lender can delay repayment for a period of years in full knowledge that the business may fail between now and then. The startup accepts an otherwise ridiculous interest rate. Or a hybrid approach can be made whereby the later debt can be settled with stock, stock valuated when the debt is due. Maybe the stock takes off and repayment is easy, or maybe the stock tanks and the lender takes substantial ownership of the company. The deal still begins life as a loan.
Lending money to a business and buying a shares in that business are not mutually exclusive concepts. There is an entire range of schemes available between those two options.
Obviously not written by a lender. There are countless schemes for lending money. These are custom contracts, not credit cards. At the simplest, a lender can delay repayment for a period of years in full knowledge that the business may fail between now and then. The startup accepts an otherwise ridiculous interest rate. Or a hybrid approach can be made whereby the later debt can be settled with stock, stock valuated when the debt is due. Maybe the stock takes off and repayment is easy, or maybe the stock tanks and the lender takes substantial ownership of the company. The deal still begins life as a loan.
Lending money to a business and buying a shares in that business are not mutually exclusive concepts. There is an entire range of schemes available between those two options.