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

>How come they keep getting funds?

Because investors believe that company will eventually make money. Many of these companies are offering their products/services below cost in order to grow market share and get users. Then once they become established they can raise prices to become profitable. Uber, Amazon, Netflix, pretty much every social media platform are examples of companies doing this exact playbook.