Page 64 - #letter to son

#SangamNiti AFTERNOON MUSINGS
Plus, the quantum of returns, unfixed as they are, can be calibrated
according to the business’ performance and not downdrafted like fixed
interest obligations.

Importantly, equity investments do not guarantee returns and yet leave
substantive upside for core investors who have believed in the growth
potential of the company and have placed their early trust in these.
On the other hand, there is a risk of borrowed capital, especially if the
entrepreneur does not have a clear visibility on their ability to pay. So
for entrepreneurs, especially in the start-up phase, it is always a good
idea to weigh the pros and cons of the cost of equity versus the cost of
debt – this could often mean a difference between sustainable survival
or premature expiry.

#SangamNiti: Always keep in mind that equity is not a yoke like debt –
in fact, it is the most sustainable route to growth. In addition to helping
unleash the entrepreneurial spirit, it also helps build conviction in the
future of the business.

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