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Comment by donnythecroc | Hacker News Reader

Isn't the biggest thing here that he never spent any of the VC money of he had $35m in the bank he bootstrapped!!!!

How does that even happen? Don't they have salaries to pay or marketing campaigns to run, pay rent? How can he sit on a pile of money and still grow the business?

Being near profitable is the obvious way, though I find that surprising early on.

What happens if you don't actually spend VC money? Do they still get partial ownership?

This is the first time I hear of a situation like this, and I'm really curious.

> What happens if you don't actually spend VC money? Do they still get partial ownership?

Yes. Just like you still pay interest on a loan even if you just let the cash all sit in a bank account.

A lot of banks will set up an offset account with your loan so you only pay interest on the money you use.

A loan is fundamentally different from a share purchase though, you can try to buy back you shares but that would be a separate negotiation.

What's the reasoning for not using it?

I have no idea why Hashicorp didn't use it. The point is just that if you made a contract for something and they hold up their end, you've gotta hold up your end, even if you ended up not using what they provided.

Are there VC contracts where actually spending the money is a stipulation?

I'm sure there are cases where doing a specific thing (e.g. buying another company, or paying off particular debts) with the money is part of the deal. And sometimes an investor will demand a board seat which gives them a way to influence other decisions. But I'd be amazed if a VC wanted a "spend the money on something" provision - if you really can't think of anything to use the money for, letting it sit is better than burning it. You're always obliged to use your best business judgement on behalf of your shareholders, which would seem to cover making use of the money if you have a good use for it, and not if you don't.

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