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A comment on Ten predictions (2004). Parent comment

Re:Ten predictions (2004) by seanmcdirmid on Friday February 15, 2013 @11:54PM (#5230445)
Not really. Say you take $100 million in finance, so you are now $100 million in debt and you are probably not going to put the money in the bank, but spend it. When you spend (invest) the money, that is taken away from earnings and you can spend more than you earn thanks to the financing. Even if the company's valuation goes up because of these investments, they are still taking a loss now. You have to take a hit now to grow and earn more later.

I'm not an accountant, and this is just my uninformed understanding.

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Re:Ten predictions (2004) by chc on Saturday February 16, 2013 @12:29PM (#5232206)
> Say you take $100 million in finance, so you are now $100 million in debt

Venture capital is not a loan; it's a purchase of equity. You are not in debt after taking money.

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Re:Ten predictions (2004) by seanmcdirmid on Saturday February 16, 2013 @05:18PM (#5233272)
You are right. But the $100m is not earnings either, and you have to spend it, so your balance sheet is still negative for awhile.
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