You'd think that, but the percentage of failure I've personally witnessed tells me there's profit in the write-offs, too.
ETA: In the venture capitalist realm, I hear you fund 10 businesses with the hope that one of them strikes it rich.
ETA: In the venture capitalist realm, I hear you fund 10 businesses with the hope that one of them strikes it rich.
Often they'll take out large loans secured on both house and business, along with a chunk of their own (or investor/friends) money to get things started. The lenders get to stick nice chunky rates on the whole thing and generally have limited downside because collateral.
I don't mean to imply the banks are doing anything wrong, just that the business model is based on managed downside rather than "striking it rich"
VC is not always equity, especially in the early stages of a company. Convertible notes are debt instruments (and SAFEs are warrants).
They convert to equity eventually, so you are of course correct in the long run (and why it's a nitpick).
But until that happens your investors are debt holders.