Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Debt is coming to the tech industry

alexdanco.com

Post reply on HN
Print view View original

201–204 of 204 posts

Re: Debt is coming to the tech industry

#201

Post by ghastmaster »

citrablue wrote: post #192
ghastmaster wrote: post #170

Earlier quoted context omitted.

Look up the word "savings". It is possible to rent a cheap apartment, buy a used car, and wait until you can afford better things. Obviously some people are going to run into financial difficulties if they have unexpected extraordinary bills. The vast majority of things in life are however, expected. Nothing is new under the sun. The overwhelming debt of the world increases costs. Additionally, debt temporarily trick…

Of course, you miss out on real estate for a number of years while you do this. Time in market and leverage are important.

Important for what? Your home is not and should no be an investment. Investments come with risks. Don't risk losing your means of shelter because you wanted to make money. Compounding gains with loans for real estate investment as a business does make leverage seem important. That is, until a scenario where real estate prices fall, you cannot acquire more property because you leverage based on property price, loans pay your expenses, and you lose your investments. Pay with cash and renters pay your expenses.

Re: Debt is coming to the tech industry

#203

Post by charwalker »

ec109685 wrote: post #52
wongarsu wrote: post #40

Earlier quoted context omitted.

I don't think it's only cultural, software businesses also have very few assets that could be liquidated. Volkswagen might finance 2/3 of everything it does with debt, but if it just stopped tomorrow and sold all production facilities then lenders would get more than half their money back. If a typical software startup stops operating and sells off all its assets it gets a bit of spare change and the lenders leave wi…

The users paying each month are the assets in this article’s thesis. As long as when a company shuts down, they transition their users to a new entity (since they are valuable reoccurring revenue), the lenders will get paid.

How do you assure that users will transition to something that will pay the lenders? If a SaaS startup goes down tomorrow and the VC backers or lenders don't own the direct competition, then when users jump ship the VC backers or lenders have nothing. The SaaS startup's cloud space can't be sold at auction, they probably rented any office space, and the employees will take their CV elsewhere. The IP might be salvageable if patented or otherwise unique but that's still a long shot given any direct competition.

No where in there is a method to retain users or shift them to benefit the VC backers or lenders and recover debt. Maybe via user data that can be sold or pitched as useful to a competitor? Maybe by standing up a competitor and advocating users shift there an can migrate their accounts?

Re: Debt is coming to the tech industry

#204

Post by texasbigdata »

nwenzel wrote: post #108
jklein11 wrote: post #93

Earlier quoted context omitted.

Do you have examples of companies with positive margin and operating cashflow that went belly up because of outstanding debt? I would think the debt holders would rather cut a deal than let the company go belly up. $.50 on the dollar is better than zero cents on the dollar.

General Motors. Several airlines. You’re describing bankruptcy protection. It means the debt holders will agree to pennies on the dollar or possibly even to forgive the debt but take over the equity wiping out the common shareholders. Companies can file for bankruptcy protection or debt holders can effectively force companies into bankruptcy if they default on their debt payments.

Let's be specific: chapter 11 (reorganization) and chapter 7 (liquidation) are completely different.
Post reply on HN