[addicted]

Are there other examples of well capitalized technology startups that have significant revenues that have also opted for significant debt financing?

[empath75]

I'm going to paraphrase Matt Levine here -- the central trick of bankers is to divide debt into tranches of claims of different seniority, with different rates of return. Debt is a way to borrow money from investors where they actually have a generally low rate of return specified and have a senior claim on being paid back in the case of insolvency. Stocks are a way to borrow money for investors where they get basically _nothing_ in the case of insolvency, but they expect a higher return from either dividends or stock buy backs, or just from company growth. Different investors have different goals in terms of risk/reward for what they want out of a company they invest in, and providing investors more options unlocks more opportunities to raise money.

[frankchn]

Amazon issued $1.25 billion in convertible debt in 1999: https://www.wired.com/1999/01/an-amazonian-debt/

[dmurray]

Convertible debt is very different: if you do the same (simplistic) analysis as in the article, it behaves almost like the equity example, not the debt one.

[neom]

We had way more debt than venture financing in the pre-ipo days of DigitalOcean. Thanks Michael Dell!

[president_zippy]

As a shareholder, thanks for going the convertible debt route! I like the fact that the company became profitable but the call option component of the previous round of "senior convertible notes" expired out of the money.

Comparatively speaking, I don't know why investors won't touch DOCN with a 10-foot pole, but I will gleefully reap my returns from dividends and stock buybacks when DOCN laps AWS in 20 years with better services maintained by better engineering staff.

[nl]

It's so common that mismanagement of risks associated with it led to the fall of Silicon Valley Bank.

This Forbes article has a good overview: https://www.forbes.com/sites/amyfeldman/2023/03/19/silicon-v...

[JumpCrisscross]

> well capitalized technology startups that have significant revenues that have also opted for significant debt financing?

Debt is almost always cheaper than equity. Particularly if you can collateralise.

Well-capitalized companies rejecting debt is more of a Silicon Valley outlier in the global economy. (It likely stems from dot-com trauma.)

[terminalshort]

It stems from the relatively low capital requirements of tech companies relative to other industries (pre-LLM). Now that this factor has changed we see them rapidly adopting debt financing for their capital intensive LLM projects.

[mamonster]

>Well-capitalized companies rejecting debt is more of a Silicon Valley outlier in the global economy.

IMO it's because CFO is treated as a second-tier C-suite role in Silicon Valley and a lot of the CFOs are completely substandard as a result.

A lot of CEO have the mentality that if the product and the tech works the money sorts itself out, so your CFO is already behind the CTO and the CPO.

[Closi]

Amazon?

https://www.seattletimes.com/business/amazon-pays-off-its-hi...

[shmatt]

This is literally the reason behind the collapse of Silicon Valley Bank. Debt keeps your cap table untouched, its very tempting at certain stages

[reaperducer]

Are there other examples of well capitalized technology startups

I think we're well beyond the point where OpenAI can be called a "startup."

[epolanski]

Pointless argument unless you define what startup means.

Different dictionaries provide different definitions.

A common one is that it's small and recently started business, but it's a very vague boundary.