The Living Thing / Notebooks : Financing things

Normative and speculative, not descriptive. For descriptive stuff, see Financial markets.

On unorthodox ways to get capital-intensive risking things done. Weird stakeholder models. Worker owned firms. Der Mittelstand. Capitalism’s end game. Mechanism design, Mechanism design.

We’ve worked with the team at Cooley to create an investment instrument that has elements of both debt and equity. Debt in that we will not be purchasing equity initially, but, unlike debt, there is no maturity date, no collateralization of assets and no recourse if it’s never paid back. The equity element will only become a factor if the participating company chooses to raise a round of financing or sell out to an acquiring company. We don’t have a clever acronym or name for this instrument yet, but I’m sure we’ll come up with something great.

This instrument gives us a lot more flexibility to work with different types of companies than the Delaware C-Corps most commonly funded by VCs. It also facilitates the two elements of the terms that were most important to us and to founders: cash distributions and contingent equity conversion.