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If the situation is dire, you may also consider recapitalizing the business through a debt refinancing or by selling equity. See if you and your finance staff can answer these questions: When did my business become unprofitable, and what caused the change? What are my top 3 costs? How do I Turnaround an Unprofitable Business?
The parallels to the music industry are too obvious even though the industry players, the medium and the cost structures are different. Finance where needed. On the positive side, corporate profits are up, their balance sheets have been repaired and they have recapitalized themselves to have lower amounts of debt relative to equity.
When the company hits potholes, Flexible VC investors usually don’t have the nuclear options of firing management and/or doing a recapitalization. Part of the magic of revenue-based financing is how historical performance and strong, achievable financial projections are ultimately the backbone of how RBI/RBF investment decisions are made.”
The opportunity cost is probably too high. The company is acquired, recapitalized, or otherwise restructured and the advisors are no longer useful or desired. Or you can just “burn the boats at the shore&# and give the advisory shares to the investor with the agreement that he will invest a minimum amount in the financing.
Why the Unicorn Financing Market Just Became Dangerous…For All Involved. By the first quarter of 2016, the late-stage financing market had changed materially. Investors were becoming nervous and were no longer willing to underwrite new Unicorn-level financings at the drop of a hat. 2015 was the exact opposite.
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