How do companies keep surviving when their returns are less than cost of capital for many years?

Question

I have decent understanding of every business topic except why business are running with cost of capital 10-12% but they make only 5-8%. If they keep losing at some point the debt becomes unsustainable. How come they keep getting funds?

What’s the point of such business? Is it only to create jobs?

In: Economics

Answer 1

You spend investor money to attract customers, then once you have enough customers relying on the business the investors can make a profit from them.

That’s one of the reasons for the current enshittification of everything – investors have decided they have paid you enough for good cheap services so it’s time to jack the price up and cut back service so you pay them back.