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

It depends… a lot of venture capital is a numbers game. VC’s invest in big portfolios of companies, and many fail. They might lose all/most of their investment on 7of 10 companies, with 2 making decent returns and 1 home run that more than makes up for the 7 total loses.

WeWork is somewhat different in terms of its size/scale. Most companies don’t take on such vast amounts of investment. But WeWork also did eventually go public so many of the investors may have already liquidated some of their shares to pull money off the table, and leave investors who bought the shares post IPO to take the loss. At their IPO, WeWork was valued at $9 billion, so that suggests investors were looking at a big loss even if they sold soon after the IPO, and it’s only gotten worse since then.