What is Capital?

What is Capital?


When we focus in on financial investors, we're talking about capital allocators in the sense of taking cash and investing it in a specific structure. We'll typically defer to the phrase "businesses" as the end asset that you invest in, but these can be functioning businesses, startups, properties, etc. Value-creating assets. The way that investors fund these businesses can generally be looked at in two buckets: Debt and equity.


Investing in a company in exchange for equity means that investors get a percentage of whatever the outcome is.


  • Who extends debt capital?
    • Why do they? Because this is how they make money. They take Capital from consumers and pay them interest in the hopes of getting a higher return on their end
    • What's their strategy? Extremely conservative. Since their returns are a lot lower, they can’t afford many losses. This is why they get seniority in liquidation and access to collateral.
    • This is a two-edged sword because the seniority and collateral is what allows them to give you access to capital at a really cheap price. If you take equity, your new investor gets a share of every dollar earned.


Capital: Other Resources