I never understood how venture investments worked even though I studied economic science. Let‘s say WeWork for example. If they got 17 billion as an investment and are now bankrupt. Are the owners still rich or broke and blacklisted for future investments idk

Question

I never understood how venture investments worked even though I studied economic science. Let‘s say WeWork for example. If they got 17 billion as an investment and are now bankrupt. Are the owners still rich or broke and blacklisted for future investments idk

In: 755

Answer 1

What some people here forget: the companies are re-valued with each funding round. So e.g. at some point, someone offers 1bn for 10% -> the whole company is then valued at 10bn, although 90% of the shares were bought at a significantly lower prices. So the top valuations are to some extent theoretical numbers and shareholders have massive book gains, but they are not realized before they sell the shares. When valuation crashes, especially early investors who bought their shares cheap don’t loose too much actual money which they spend on the shares, but rather loose a lot of their theoretical gains