A fundamental insight about finance: Suppose the bank has $250k and you want to buy a house costing that. The bank, by convincing you to take out a mortgage, ends the day *materially* better off than it started, because your promise to repay is worth *a lot* more than $250k.
You can imagine an instrument which says “Here is a sample of 1,000 FooCorp accounts of the August 2019 vintage. FooCorp will continue servicing these accounts indefinitely, collecting a 20% servicing fee, and remit all other payments on a monthly basis to the holder of this.”
-
-
I’m not trying to be stupid, but why would it be better for FooCorp to get a check now and 20% of their revenue as opposed to just keeping all their revenue, and if they need capital borrowing it? What need would such an instrument fill?
-
That’s a reasonable question! The answer is that since the contract has a value under GAAP of zero but a very non-zero economic value and the company produces many more of them every month, borrowing anything like the amount of value created would be impossible conventionally.
End of conversation
New conversation -
-
-
That instrument does not presently exist but it’s plausibly one YC company away from existing, and if it existed it would very clearly have a market clearing price more than $1k and less than $1M that various parties would have reason to value differently.
-
Sounds like something Stripe would want to do.
- 1 more reply
New conversation -
Loading seems to be taking a while.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.