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Kevin Li's avatar

"Consider VCs purchasing 20% of a VC-backed rollup: if ~100% of the capital finances acquisitions, VCs have paid a 5x premium to book. A 20x return on the underlying asset would be legendary, and the VCs would make 4x their investment. Silly!"

But why would the founder use equity money to finance acquisitions? Wouldn't they (and the VC) be much better off if they finance acquisitions with debt?

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