Start ups usually lose money while they’re getting established. You have build the product, hire the team, and then get customers. So, you lose money for several years — which is why Angel Investors, venture capital firms, etc. exist.
Take a novel medication, for example. You aren’t making a dime until you get FDA (in the U.S.) approval and so you do fundraising rounds to hire staff, do clinical trials, scale up manufacturing, etc. Then, once you get approved, you (ideally) make a fortune.
Ideally for the early stage investors (and staff that was partially compensated in shares), you “make an exit” — get bought by a bigger company or go public. And that’s when everyone gets paid. If a company stays private forever, you repay early investors with dividends or share buybacks (or everyone is just sort of fucked and waiting for an exit). Shares in a private company have value on paper but no store takes SpaceX shares as a payment method.
Raising money? Aren’t companies suppose to generate money? Didn’t twitter lose a large portion of its ad revenue?
Start ups usually lose money while they’re getting established. You have build the product, hire the team, and then get customers. So, you lose money for several years — which is why Angel Investors, venture capital firms, etc. exist.
Take a novel medication, for example. You aren’t making a dime until you get FDA (in the U.S.) approval and so you do fundraising rounds to hire staff, do clinical trials, scale up manufacturing, etc. Then, once you get approved, you (ideally) make a fortune.
Ideally for the early stage investors (and staff that was partially compensated in shares), you “make an exit” — get bought by a bigger company or go public. And that’s when everyone gets paid. If a company stays private forever, you repay early investors with dividends or share buybacks (or everyone is just sort of fucked and waiting for an exit). Shares in a private company have value on paper but no store takes SpaceX shares as a payment method.