Is Your Startup A Cash or Equity Business?

Author: Elad Gil, San Francisco, CA, USA.
Source:. Is Your Startup A Cash or Equity Business?.





There is, generally speaking, two types of ways to create value in business.
( a). Business on the basis of ...
( b). Business based on the ...

Figuring out what kind of business you want to start (or, in hindsight, you started ) all start from the fact whether you should seek the money, what will keep your employees. Fundamental misunderstanding of the form of your business can lead to errors, overwhelming success and potential of the company.

Business -oriented capital.

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  Getting the money:. Receipt of the ... Normally, you need to invest a large amount of money (usually from external investors and transactions) for the duration of growth of the business before you actually create value and earn money for expansion. I hope your company will work well, and your earnings are sufficient to meet the enterprise economy.
  


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  Remuneration of employees:. focus towards small cash bonuses and. You do not want to pay the staff a lot, so you'll keep growing the money. Growing Money dilute equity, which is where there is a long-term cost.
  


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  The time horizon:. The average outcome of mergers and acquisitions - is 6.5 years, and most companies take many years to become an open. The cost is usually developed relatively late in life companies.
  


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  Examples of companies:. Google, Facebook, Twitter.
  


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  Other key features:. These companies typically have a period where they do not shed a lot of money upfront, but rather to reinvest in the growth and business expansion. Business based on the capital could lose money in the first few years before leaving as a money machine that has a unique place in the industry (think Facebook). Similarly, these businesses often have a strong ...
  

Business -oriented money.

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  Getting the money:. Emphasis on the ... Income you may expect, could not align business income, but you can pay back the money as a dividend.
  


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  Remuneration of employees:. Pay more out of your profits in cash, the capital has only secondary importance, since the cost of capital of these companies is low (r. e. you can not sell the company for many other buyers ).
  


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  The time horizon:. Often in these kinds of business start-up phase, creating money quickly (on the order of several months to a year - remember the phrase ...
  


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  Examples of companies:. Most small companies social media game. Most of the clones GroupOn.
  


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  Other key features:. Often, these businesses have less difficulty to enter less ...
  

Note, as developing the company can move to the capital of the business to business to money, or vice versa. For example, Microsoft is no longer a big player in the concept of the highest category of their shares, but they sure are paying dividends, and show good profitability. So it is both representative GroupOn business on the basis of money (meaning all the small clones GroupOn, which bring instant profit), which over time makes the cost of capital through the branding, distribution and extension.


Translated for the blog dennydov. blogspot. com.
Alexei Liapidevskii.


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