Sources of Business Finance

Amazon famously reinvested nearly all profits back into the business for over two decades. Instead of paying dividends, Jeff Bezos used retained earnings to build warehouses, develop AWS, acquire Whole Foods, and fund new ventures like Prime Video and Alexa. This aggressive reinvestment strategy transformed Amazon from an online bookstore into a trillion-dollar empire. Similarly, Alphabet (Google) retains most earnings to fund moonshot projects like Waymo autonomous vehicles and Verily life sciences.

In 2021, General Electric sold its aircraft leasing business (GECAS) to AerCap for $30 billion to streamline operations and reduce debt. IBM sold its Watson Health business to focus on hybrid cloud and AI. These strategic divestitures generate substantial capital while allowing companies to focus on core competencies. Even tech companies do this—when Facebook (Meta) sold Glooko, or when eBay spun off PayPal, they unlocked value trapped in non-core assets.

Dell pioneered negative working capital by collecting payment from customers before paying suppliers, effectively having suppliers finance operations. Amazon operates similarly—they receive customer payments immediately but pay suppliers 30-90 days later, creating billions in operational cash flow. This working capital efficiency provides free capital for growth without external financing.

Uber's first check came from angel investors including First Round Capital's Chris Sacca, who invested $300,000 in 2010—a stake that eventually became worth over $1 billion. Peter Thiel's famous $500,000 angel investment in Facebook turned into over $1 billion. Angel investors like Naval Ravikant, Jason Calacanis, and Reid Hoffman have seeded hundreds of successful startups including Uber, Twitter, and Airbnb in their earliest days.

Stripe raised venture capital from Sequoia Capital, Andreessen Horowitz, and others—accumulating billions in funding across multiple rounds. By 2023, Stripe's valuation reached $50 billion. OpenAI raised $10 billion from Microsoft at a $29 billion valuation. Notion raised funding from Sequoia and Index Ventures, growing from a small productivity tool to a $10 billion company. These VC-backed companies use capital to hire rapidly, acquire customers, and dominate markets before profitability.

When Airbnb went public in December 2020, they raised $3.5 billion at a $47 billion valuation. Rivian's 2021 IPO raised $12 billion, the largest IPO since Facebook. Instacart's 2023 IPO, while more modest, still raised $660 million. These public offerings provide massive capital for expansion while offering early investors and employees liquidity. However, companies must now satisfy public shareholders and comply with extensive SEC regulations.

Small businesses frequently use SBA (Small Business Administration) loans backed by the U.S. government. When a restaurant chain wants to open new locations, they typically secure bank loans using existing locations as collateral. Even tech companies use debt—Apple has issued bonds despite having massive cash reserves because low interest rates made borrowing cheaper than repatriating overseas cash.

Tesla issued $1.8 billion in junk bonds in 2017 to fund Model 3 production when they were burning cash rapidly. Disney issued bonds to finance their Fox acquisition. During 2020's pandemic, companies issued record amounts of bonds taking advantage of ultra-low interest rates set by the Federal Reserve. Investment-grade companies like Microsoft and Johnson & Johnson can borrow at rates just above Treasury yields.

The Pebble smartwatch raised $10 million on Kickstarter in 2012, proving consumer demand before manufacturing. Oculus VR raised $2.4 million on Kickstarter before Facebook acquired them for $2 billion. More recently, Glowforge (3D laser printer) raised $28 million through crowdfunding. Equity crowdfunding platforms like Republic and StartEngine let non-accredited investors buy startup equity—Miso Robotics raised millions this way for their kitchen automation robots.

SpaceX received NASA contracts worth billions, providing crucial early revenue while developing reusable rockets. Tesla benefited from $465 million in Department of Energy loans (later repaid early) and billions in electric vehicle tax credits for customers. Moderna received nearly $1 billion from the U.S. government to develop COVID-19 vaccines. The CHIPS Act is providing billions to semiconductor companies like Intel and TSMC to build U.S. factories.

Most B2B transactions include payment terms like "Net 30" or "Net 60," meaning payment is due 30-60 days after delivery. Retailers like Walmart negotiate extended payment terms with suppliers while selling products to consumers immediately for cash. This financing method is invisible but crucial—it's how most businesses manage cash flow without formal loans.