Ryan Rutan: Welcome back to the episode of the Startup Therapy podcast. This is Ryan Ran joined as always by my friend, the founder and CEO of Startups.com, Will Schroeder. Will, you've done it. I've done it. Most of the startup founders we talked to have done it. We've put money in, we've accumulated debt. We've run up credit cards. We've done lots of things in the name of building our business that we're not in the name of our own financial security. When do we get paid back? How often in the history of history do people get paid back for this stuff?
Wil Schroter: If we're talking about when do investors pay us back for all the money that we've put in, it's right after never. and that that's the thing again, this is we always joke about nobody put this in the instruction manual, nobody put this in the brochure. There's this idea, and then I, I, I think it's, I think it's a reasonable conclusion. It's just completely false, that's what we're gonna talk about today. I, I think there's a reasonable conclusion when we start a business. That if we borrow money or invest money from ourselves, that money will get paid back, or at least could get paid back. So the idea is, hey, I've borrowed, let's say this, an actual loan, I've borrowed $50,000 from a bank, maybe an SBA loan or something like that, and I got to pay that back. So when I raise capital from investors, they're gonna help pay that off, right? Or I took out money out of my home equity loan, just different version of a debt, and I'll get paid that back, right? And what we find out over a way too long period of time, is the answer is no. And so today let's talk about all the things we will not get paid back, and why?
Ryan Rutan: What do you think are the most common ones? Like if we think about the ways in which we accumulate this money, like, when this debt run this money. What what are the most common ones at the early stages? Typically,
Wil Schroter: it's gonna come from either a salary or a loan. Say loan, I don't, it doesn't have to explicitly be a loan, it's just money we took out of somewhere, whether we borrowed it or whether it was in our savings account, to put into the company, how in the company. So let's break them out separately, OK? The first one is obviously salary. And here's the thinking, the thinking goes something like this. I was making, let's say $150,000 at my last job, doesn't matter what the numbers. I was making $150,000 at my last job, and now I'm only taking $50,000 salary. Obviously, I'm gonna need to get paid back for that $100,000 that I didn't get paid. Just
Ryan Rutan: a couple of quick catch up payments, no big deal.
Wil Schroter: Right, now, here's before we go further, I think what's kind of interesting is who we have those conversations with. They typically involve our spouse if we have one. They typically involve each other as co-founders, right? Hey, Ryan, you put in 50,000, I'll put in 50,000, and we go raise more money, we'll get that back so we can keep growing the company. It sounds pretty good. Well,
Ryan Rutan: it's definitely always feels better to be deluded with someone else, right? Like, when we're gonna be delusional, better to have a friend.
Wil Schroter: Sure, but I, I also think we make like an Implicit pact, let's say we go back to our spouses, right? You go back to your wife, I go back to my wife, and we both say, hey, we're gonna take $100,000 out of our 401k or our kids' education fund, or it doesn't matter,
Ryan Rutan: right? Don't worry, we're gonna go raise funds and we'll get that money right back,
Wil Schroter: or we're gonna go rack up credit card debt, which is the most likely outcome. But again, we're like, that's OK, because that's just to get us started. Once we get a little bit bigger, and we start raising some money, it's all good. Investors will help us pay pay those debts off and we'll we'll be good. We actually believe that, except it doesn't occur to us that no one ever said that was true. Kind of a big bet to make. There
Ryan Rutan: is, there's a really important voice missing from those conversations. The people that you thought were going to give you the money to pay it back, right? Talk to your spouse about it, talk to your co-founder about it. You might want to talk to the people who are gonna write the checks that you think you're gonna reduce by the amount you want to be paid back.
Wil Schroter: The challenge is those people aren't in the room yet because they're a couple years out or whatever our timeline is. Right now you and I are just thinking about quitting our jobs and starting this thing. So, it, the person like you're talking about, the expert that we need to give us the answer actually isn't present and doesn't become present until about the most inopportune time in this whole process, when we're out of money and we need
Ryan Rutan: money. And when they're there to tell you that no, they're not going to let you take money from that investment to pay back those debts.
Wil Schroter: Here's what this looks like. A few times a week, Ryan, you and I get somebody that comes to us, the founder that we're trying to help raise money, and they say the same thing and I and I get it, cause you and I have been there, so, so we get it. They say, hey, look, up until now, I've normally got paid $150,000 salary in my last job, but for the last 8 or 2 years or whatever the time frame is, I've only been uh paying myself $50,000 or maybe nothing. So, obviously I'm gonna need to be made whole for that cause that was an investment. And second, I got $50,000 sitting on my credit cards right now, and we took a loan out from whatever company for another $50,000. The company owes those, we're obviously gonna have to pay those back as well.
Ryan Rutan: This just happened a couple weeks ago. I stumbled across a slick conversation within the startups.com community where they were having this discussion on, hey, yeah, we're all in this same boat of having taken out a bunch of money. We're all about to raise funds. Let's figure out how we get paid back this round, right? Sadly, my very succinct answer was two words you don't, right? Um,
Wil Schroter: which sucks, which sucks.
Ryan Rutan: It's an awful answer. It's an awful answer, but it is the answer, right? So just because those investors aren't in the room when you're making those deals with your spouse, with your co-founder, doesn't mean that if they were in the room that they would have gone. Yeah, that that seems reasonable. Let's go ahead and do that.
Wil Schroter: That's the thing, so in our minds, the company can create a debt, and that debt is required to be paid back. So you'll talk to an accountant, this is hilarious. Here's what they'll say, Oh, don't worry about it. Just take whatever debts you're creating. You put those on the balance sheet, and now the company has to pay them. They're on the balance sheet. They're on the balance sheet. Yep,
Ryan Rutan: yep. One more voice add to the conversation that still isn't the right voice,
Wil Schroter: correct? Yep, yep, that would be called an IOU never. That's when it's gonna get paid. We talk about this, and again, we're laughing about it for the folks that are in this right now, the folks that are hearing this for the first time, they ain't laughing right now, right? Those folks are like, wait, are you guys serious right now? Cause you seem pretty cavalier about something that's pretty disastrous for me. I'm laughing about it and maybe you are too, because I've lived it. I like I I I I went through this same assumption. Yes,
Ryan Rutan: yeah, yeah, I've, I've heard this more than once. It was, I was like, fool me thrice, what is that one? What's that one called?
Wil Schroter: I had this idea, so, so I'm gonna go many moons ago. I'd started a company, and we were raising venture for
Ryan Rutan: years would be easier, it's gonna take forever.
Wil Schroter: Yeah. Decades, and we uh we started a company, and I'd put in, let's call it about $200,000 of real money, right? Not like, hey, this is money I wasn't otherwise getting paid
Ryan Rutan: foregone salary, some sweat equity, right? No, this was cash from somewhere paid into an account. Yeah,
Wil Schroter: exactly, yeah, no, this is actual cash, yeah, yeah. And so we go to raise money and we're doing our seed round and it's like maybe a $1.5 million seed brown, and we go to the investor, that your first investor who was gung ho to invest. And as we present our financials, we basically say, hey, we've had $200,000 invested so far, right? That's part of this, etc. etc. And he looks at me like I've got two heads, what? He's, I don't care how much you've far. Now, when he says that he's a good guy too, he's a friend of mine, right? What he was saying is that money is gone, dude, and you're the only person that doesn't know it. And I'm like, huh? I was, I like, I was
Ryan Rutan: proud, even now that you've said that, I still don't know it. It doesn't, that doesn't make sense to me. Why does this happen?
Wil Schroter: Dude, I, I was proud to tell him that this money is a big investor, that we need to recoup their money, cause guess what? The moment he puts in his money, he's not gonna let anybody forget that. It's like dude, I put in a million 5, I got a preference on that, I'm getting that back, etc. and I'm like, why wouldn't that work the same for me? And this is where you'll start to learn that it's all about who's investing next, and that person doesn't give a rat's ass about who invested last, particularly the the founder round, if you will, the, the founder round tends to evaporate every
Ryan Rutan: time. Yeah. Oh, the founder, the founder round isn't even really around, right? And, and look, to be fair, right, like let's let's back up on that a little bit. Are investors doing this because they're mean, cruel, evil people who want to see you suffer longer than you need to? No, they're just trying to make their money, make money. Right? Same thing you're trying to do, right? And remember when you put your $50,000 in credit card debt in, you also had 100% of the cap table. You were incentivized to do, right? And to your point, once these things are done, they're done, right? We are not filling buckets with water that's already passed under the bridge, and that's exactly the point you're making now, right, which is that the next investor round doesn't care what happened in the previous round, they just under, they won't understand how, what are the deal mechanics for me? What, what am I gonna get from this?
Wil Schroter: You bet, and, and to be clear, it's particularly that founder round that gets squeezed. The bound round being again, we're just calling it the first money that that anybody's ever put into it. You typically our own money, right? And again, I'm also lumping money and time to be the same thing. Going back to what we said a moment ago when we said $150,000 let's say Ryan, you and I are co-founders, we're both making $150,000 in market, we haven't been paid for the last year. There's a $300,000 total debt. That exists at the company that needs to get paid back via VR investment.
Ryan Rutan: Stick on this for just a second, because I think this is really interesting. I think it's really interesting. It's a great point here. It doesn't matter how believable the calculation is, whether it's, oh, this is true market salary, or this is money that I put in from my checking account. I emptied my 401k, I took a loan from granny. The point here is, it doesn't matter. Because it's not getting paid back anyways, that's it. So it doesn't matter how much we justify it, how much your accountant says it's real, how much grandma remembers it's real, it's not real for anybody else.
Wil Schroter: It does, yeah, it actually doesn't matter. And and so, as we try to justify this more, we say, hold on investor person, you're telling me that if Ryan and I invested $3 collectively in another startup, that we could get our money back, that would literally be the preference payment or anything else like that. But if we invested in our own startup, we can't get it paid back, and, and the answer is 100% yes, and it makes no sense on paper until you understand the rest of the equation, which leads us to why would an investor invest in something where they have to pay back debt, OK, so, so let's zoom out a little bit. And let's look, look at things from not our eyes, we're well aware of what that looks like. Let's talk about it from the investors' eyes, OK? First things first. Ryan, if you and I say that we are investors and and we've got a check to write, how many new friends are we about to make?
Ryan Rutan: Oh, all of them.
Wil Schroter: Right, if you're so many people coming to you with deals, which means you have options, lots and lots of options, right? So, a, a good professional investor does this well, does it for a living, and there are only so many, but they exist, could look at as many as 10 to 20 decks a week, maybe more, depending on who they are. If you're looking through 10 to 20 deals on a given week, or two of them. Have some bizarre IOU that the founders have written to themselves, so basically anchor that they've attached to this deal. Why would you spend time on that deal if there are 18 other deals that simply don't have that problem?
Ryan Rutan: This is, let's, can we say this 2 or 3 more times, because this is super important, right? I, I think it's so easy to forget when we're out stomping around with our pitch deck. And we're presenting our deal to people, we forget that this is a competitive environment, right? So to your point, there's 10 or 20 other decks that they're gonna look at. Do you want to be the one out of 20? Let's just say all all else held equal, let's say you were one of the top 3, right? And then you go on and on about this money that you need to get paid back, and these decisions that you made that you're no longer happy with and you want to rectify with their cash. Where do you think that puts you in the overall rankings at this point, right? Do you think that might impact The decision of the investor, it's interesting to me, and I don't think this is something that we've talked about before, but do we even introduce this into the conversation, right? You and I would argue no, I would argue no, because we know it's not gonna get paid back anyways. But it's not one of those questions where it's, you're probably not gonna get paid back anyways, but it's probably worth asking. In my opinion, curious to hear yours, I would say it's probably not worth asking because it, it the most that's gonna come of this is gonna move you somewhere down in the list because they're gonna go, hey, if I've got a bet on two people in a race, they seem to be wearing the same gear, one of them is carrying a boat anchor for some reason, right? I think I'm gonna bet on the other one. I'm just gonna guess here, right, that that maybe that one's gonna run faster. You
Wil Schroter: know, something that's really funny about everything we talk about here is that none of it is new. Everything you're dealing with right now has been done 1000 times before you, which means the answer already exists, you may just not know it, but that's OK. That's what we're here to do. We talk about this stuff on The show, but we actually solve these problems all day long at groups.startups.com. So if any of this sounds familiar, stop guessing about what to do. Let us just give you the answers to the test and be done with it. I actually lived this firsthand. I lived this firsthand. After I'd done the deal where I'd put in a couple $100,000 and, and the investor did end up investing but completely forgot about my $200,000 right? Never saw that money again. The second deal, what we are at the goal line at term sheet stage in a great position, with with a big name fund, it was 1st round, it was Josh Koppman's fund, first round ventures, right? Great, another great fund. And 1st round had a term sheet, we were negotiating through, everything was great, we were really excited and I've always wanted to work with Josh and I've always wanted to work with that team, and we get to the goal line. And I'm like, yeah, among the co-founders, we need, we need to be at about $150,000 give or take on salary, and they were like, you're raising a million dollars, and we're like, huh? And they're like, you're saying that you're raising a million dollars and you want to take literally half of that in the first year and pay 3 people with it? And like is is is that a problem? No, no, you gotta understand. I hadn't done this enough yet to understand, and this is exactly why we do these podcasts, right? That's why we have startups.com. So other people don't have to learn this lesson in real time. In the middle of the game, which is exactly what I did, I looked like a complete amateur.
Ryan Rutan: Yeah, that's exactly it, and it calls everything else into question at that point too, right? And they're like, what else do you not know about life? Lots, sir, I'm 22.
Wil Schroter: How deranged is this guy otherwise it is a fair question. And and they bailed. They bailed on that point. It was disastrous for us because we had to restart the whole round and we had to go back out. Fortunately, we ended up doing it. Uh, now that I think about it, the person that bailed us out was Founders Fund, but not the way I wanted to go, massive egg on our face with all the other investors that were participating at the time, because it looked like amateur hour. And and that's the thing, again, why would I have known that? Why would I have known that?
Ryan Rutan: You wouldn't, I, I made basically the exact same mistake, wasn't a venture round, was an angel round, and I had taken, I wasn't taking a lower salary at that point. I'd never really had a salary up until that point. This is the first business, and but in my use of funds, like one of the things I had done was taken on some credit card debt, which I think a lot of us have have done in the past. Take on some credit card debt, and I was struggling to keep up with that and make the rest of my ends meet. And so I, as part of my proposed use of funds, but I didn't want to say pay off my credit card debt. Those are personal credit cards, so I figured that doesn't make any sense. So I'm just gonna, one of the use of funds was bump my salary and I forget the the way it was put to me. He, the male investors sitting across the table from me, says, OK, so I see here that you want to use some of these funds to increase your salary. Like, yes, OK, how much of a percentage increase are we talking about? It's this, it's OK, what are you making now? And I said what the number was, and he said, OK, so here's how this is gonna work. If I decide to invest, what you're making now will be exactly what you're making after the investment. like, I don't think he was trying to like to tease me or be me, but I was leaning in just like waiting, OK, maybe this is gonna be even better than I'm expecting maybe I'm gonna have to negotiate a little bit, and he's like, no, you're gonna be making exactly the same amount of money that's not enough for you right now will be exactly what you're making after the investment should I choose to make it.
Wil Schroter: That
Ryan Rutan: reminds you how would you know like again, like you just, you don't know these things. You don't know no way to know.
Wil Schroter: Yeah, I was gonna say that reminds me of the classic where the guy like puts a, I'm gonna put a figure on this piece of paper and slide it across the table, and that's exactly what this is worth to me and you flip it over at $0.00
Ryan Rutan: dollars, yep, that's it. Here's your news. Here's your salary bump, right? Let me let me write it down for you so we remember it clearly.
Wil Schroter: Um, OK, but let's take back to the investment. Talk about why they're looking at this so incredulous. Let's go back to the first round, right? First round's a storied firm, it's a great firm, right? They have a million places they can invest, and we are fortunate to even be in a conversation with them, much less get a term sheet with them. But we blew it. We blew it because we didn't understand a very basic fact. Which is, lots of people want their money. It's not even specific to first round. You could apply this to tons of it really almost anybody with a check, but we had a golden opportunity with a great firm, and we blew it. We blew it because again, we didn't understand that they have 50 other choices, they don't have to cater, you know, to our one-off delusions. That's the cool thing about being an investor, you don't have to do it now, now. Let me talk about it from the other side, where investors actually feel this same crunch, and I'm gonna, I'm gonna get into a down round, OK, of investing is the famous phrase, she with the gold rules, right? The golden rule, she with the gold rules, which is to say, whoever currently is putting in money, sets the terms. And if they don't like what the previous terms were, the valuation, the people's preferences, etc. here's what they say. They all go away. I will not invest, you do not get my gold unless everything is reset to my terms. Now, the first time you're gonna feel this is the moment you go to raise your first money, and now the golden rule applies. The new person coming in gets to say, here are the new terms. Now, here's where this happens to investors, for the for folks that aren't familiar with this, cause it's happening everywhere right now, everywhere, because the startup landscape for investing is so frozen right now. Here's what's happening. Ryan, let's say you and I went out and we invested in a company at a $100 million valuation, OK? And, and at the time we felt good about it. Maybe we put $10 million in at a $100 million dollar valuation, we got 10% of the company. Cool. But that was 2 years ago or so, maybe 3 years ago, and the company's done OK, not great. Now that company is going out, and it's going to raise more money, but the new investor comes in, a new investor says, hey, I don't really care what you invested at last time, suckers, that was your problem, right? I'm gonna invest $10 million at a $30 million valuation, and whatever you had a moment ago is gone, and we're gonna argue, wait, no, whoa, whoa, hold on, we still got our $10 million in there, we need to be able to get our our chunk of it, etc. and they're gonna say good luck to you. They're gonna say, here's the deal, uh, you want my money, then whatever deal you got, and remember we're the investors in this case, it also applies to the founders, don't care. New money, new rules, and so that's essentially the game that gets played. We just, we're seeing it for the first time when we touch our first investor.
Ryan Rutan: Yeah, and that cause there aren't really any analogs where this would happen. There isn't really any other situation where this would occur in an early stage startup that I can think of where we would feel that type of pressure or be forced into those kind of decisions. Right, I think it really is when we start to take on money that's why we talk about this a lot, right? It's when we talk about the complexities of even deciding to take on capital because of these things, right? And especially because in a lot of cases, these are the reasons people wanted to take on cap. Why are you raising? I've got this debt I need to wipe out. Forget that, right? So are you not raising now? Because that wasn't going to happen. So now how do you feel? And so it's so important to have these conversations.
Wil Schroter: And again, If you and I had invested in that first round, right, like that $10 million at $100 million dollar valuation, OK, we're gonna try to fight with the new investors, that next round of money, to maintain our terms as well, and we're not gonna get them, because we might have said, which would be pretty standard fair, that we have a $10 million do preference on this investment, which for those that aren't familiar, just simply means that when if the company is to be sold, we get a $10 million check first. Before any other money gets divided up by percentages or anything else like that. So we basically get our money back first, and then we also get whatever percentage we have, OK? If that next year comes in, and that next investor is like, dude, I'm investing in a $30 million valuation, right? I'm investing $10 million. I'm not gonna have you have a $10 million do preference and you get a third of the company that sells for $30 like your preference goes bye bye. Now remember, you and I put that money in explicitly with the understanding that if the company ever sold, we'd get our money back, and we just got wiped. OK, so that happens at every round. Now, ex-investor, the one putting in at this next round, here's what they say, you don't like it? I got lots of other options right now.
Ryan Rutan: I
Wil Schroter: got lots of other options,
Ryan Rutan: right? Keep your equity, right? Keep it at that previous valuation, right? But at that point, right, and this is the thing we have to understand, like, there's a reason the company's raising money at that point, right? It's not just for grins, they needed cash for some reason, right? They needed it, they. to grow, they needed to succeed, they need to even stay alive, whatever it is, doesn't matter at that point, right? It, it's very rare do we see a startup who's raising in conditions like that, particularly where you're facing a down round, where it's positive circumstances. We're doing so well, what we would like to do right now is go out and raise on a lower valuation, just as a gift to the world.
Wil Schroter: It's crazy. And let's talk about what are some strategies that people try to hand us. That tell us, oh, here's how we can get it back. And the one that I heard early on, and I remember it was from like a good friend of mine in college, his father was an accountant, and he was like, hey, this isn't hard, man, just make sure that any money you put into this, that you put on the balance sheet. Here's where things get a little bit gnarly when startups founders are getting into the business of starting companies. And they start taking advice from people who were an expert in the field that aren't an expert in the field in the startup business, right? Lawyers, accountants, you name it. It's in other worlds this what they're about to tell you makes total sense. It just makes no sense here, and it's actually geometrically horrible advice that can lead you to ruin.
Ryan Rutan: It's gonna give you a sense of security, it's gonna, it's gonna make you think, or maybe make you make a decision, cause if you go, look, I'm willing to take this short term risk on liquidating portion of the 401k, all the 401k, whatever that is, because the accountant told me, put that on the balance sheet. And then of course I got to go succeed and I have to go raise that next round, but I'm feeling good about the business. I feel like we're probably gonna be able to do that. Other people are telling me it's likely we're going to be able to go and raise those funds. Cool. I'm willing to take that much risk, but I'm not willing to let that money sit out there until I sell the company, which could be 5, 1015, or never years from now. And we make a decision based on that advice, right? And, and when that's where these things start to go wrong, you go, OK, cool, now I get to that point you're having that conversation with the investor and they're like, Yeah, no. Remember the part where you didn't ask your CPA for the $1.5 million? That's why I get to answer this question and not him. So this is where I get really worried for founders, when they start to make decisions that that are different than what they would have otherwise done and they would say, look, I'm willing to risk some money to do this, but I'm not willing to risk my entire 401k knowing that I can't get it back under any circumstances like that I can't do,
Wil Schroter: right? And look again. The the advice is always well-intentioned. I, I'll I'll give you another example of just really well-intentioned horrible advice. It's it's when you talk to an attorney, and they're like, hey, before you send this pitch check out to anybody, make sure you get an NDA signed by every investor. And I think to myself, Has this person ever raised money?
Ryan Rutan: They may have done you the favor of keeping you from raising funds, right? Depending.
Wil Schroter: Oh my God, it's the worst advice you could possibly give to a start, just um if anybody's hearing this for the first time just cause we're here, no one is will ever sign an NDA.
Ryan Rutan: No, why would you? Why would they? What's in it for them?
Wil Schroter: Yeah, it's the worst advice ever given by really well-meaning but unseasoned attorneys.
Ryan Rutan: But will, it's not an NDA, it's an MNDA. It's a mutual nondisclosure. I also agree not to tell them any of your secrets that you're not gonna tell me in the first place. Yeah, it's so funny, man, there's so many of these types of advice, where again, they're not ill-intentioned. They're not even bad advice in the right place, but it's if I ask somebody, OK, look, I'm running downfield, and I'm getting close to uh being in a position to score, and my teammate passes me the ball, what should I do? Like, square up, catch it with both hands and pull it into your chest, right? Great advice if I was playing American football, but since I'm a soccer player, I'm just gonna get a red card and be thrown out of the match, right? Great advice, wrong fucking game. This is the problem.
Wil Schroter: Yeah, yeah, yeah, exactly, yeah, and just again, well intentioned, but in this particular case, we're using the same kind of advice. I see people come to us all the time, they say I talked to a CPA talked to an accountant, and they said this is no problem. They, they said, you just need to put this on your books um as a debt that you will accrue uh every month. Now, Like any debt that exists for anything in the world, a debt is only as viable as your ability and willingness to pay it back. So, Ryan, if you and I start the company, and we both agree that the $150,000 that you didn't get paid, the $150,000 that I didn't get paid, will go into a deferred comp account, and it'll and we have to pay off that liability over X number of years, and we both agree that debt is valid, and we both agree that as the company grows that we'll pay it off. Cool. Because it's in our best interest to actually do that. It's just not in anybody else's best interests. It's the effort to do that. No one cares, right? And so, I think when we go into this and we're thinking to ourselves, oh, hey, these big investments that we're making, and look, right, these are serious investments, right? Not being able to take comp, especially through some of your higher income earning years, is dangerous, right? Pulling money out of your savings, which more is hard to even have, is dangerous. Like we've been talking about, to do it on that assumption that we're getting it back in the way that we think we're getting it, like like the investors are gonna bail us out.
Ryan Rutan: Yeah, and look, we're not making the case to to not do these things, right? You may need to pull money out of your savings, you may need to forego comp in all likely you will. That's, it's just, it's not by choice, and it, it's but. Specifically want people to understand what the outcome of that is, and that there isn't an outcome whereby investors just start to get together and they're like, we really should consider how to pay those fellass back, right? They've put in so much time and effort, and I've just got all this money that I don't know what to do with. Let me just throw them some, you know what, let's just tack on a little extra, right? It, it just doesn't happen. That's not it's as ludicrous as it sounds. Yeah,
Wil Schroter: no one cares. Errors. Now, again, a couple of small caveats, right? There is no downside to recording all of this debt, right? There there really isn't to show how much you you've put in to, to show what sits out there. It's like a a fun conversation piece, but in the history of history, I have never in my 30 years, both running 9 companies myself, helping thousands of companies, I've never ever seen anyone ever get paid back. On top of that, I think when we try to saddle our own in other words, when we say, OK, hey, I'm raising money, I'm raising $1.2 million part of that is we've got $300,000 in a previous debt to a previous investor that that they need to get paid off, right? They need to get squared out, right? Same thing, we've been talking about the debt back to ourselves. If we try to layer in anyone else's debt, it's just as bad, right? It doesn't really matter who the debt is to. The point is investors aren't here to bail you out. Like they may be angels, but they're not saints, you know what I mean?
Ryan Rutan: It's absolutely. Yeah, and look, like, your point, like you go and acquire another company, let's say, we've done this a number of times. Sometimes those folks had assets and liabilities, right? We go to the next round, we're like, hey investors, we bought a couple of companies and one of them had some debt. So during this round, we're gonna wipe that debt out. Now, there may be a strong case for why that would actually improve the financial position of the company, maybe But they're basically gonna come back with that same answer, which is, hey, remember that part where you signed the documents and bought that company, but you didn't involve me and I wasn't there to tell you what I was gonna do. I'm gonna tell you what I'm gonna do now, and it's not pay the debt that you accumulated or accrued or acquired.
Wil Schroter: Yeah, so the million dollar question here, quite literally, how do I get paid back? OK, I did put that. Are you telling me it's gully, the money is on fire? Not necessarily. Here's how you get paid back, you sell the company.
Ryan Rutan: Yeah, do what you set out to do.
Wil Schroter: You sell the company and or you grow and make it and it has a ton of profit and distribution. That's it. All those investments, whether we are willing to recognize them for what they were at the time, which was essentially an investment to get our equity, to make our equity have some level of value, that's how we cash in. The downside is, no one told us, no one told us at the time. That this was a one-way street, that's a one-way investment. But if we're being honest, if we're going at it from the very beginning, no matter how much we've put in, no matter how much we've sacrificed, etc. the only way that we're ever gonna get this money back is through the sale of a company or some sort of liquidity event. And Ryan, I'm sure I speak for both of us, when we say, I hope to hell you get that money back and you get that liquidity event, cause that's what this is all about.
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