Comment by nilamo
Why does the interest rate matter? Unless you have no cash on hand and are operating soley off debt??
Why does the interest rate matter? Unless you have no cash on hand and are operating soley off debt??
My employer actually has roughly $100B of cash on hand.
The issue is that they're a publicly-traded company, with a fiduciary responsibility to shareholders. If they're investing in an internal product that will make back 1% of the money invested in it over the next couple years, but they could have been investing in Treasury Bills that make back 4.5%, they are committing financial malpractice and will be sued accordingly.
I'd have hoped someone at Google would know this is a myth.
The idea that choosing a 1% strategic internal investment over a 4.5% T-bill constitutes actionable "financial malpractice" or a breach of fiduciary duty leading to successful lawsuits is incorrect. Courts recognize that running a business requires strategic choices and risk-taking, not just maximizing immediate, risk-free yield. A lawsuit would fail unless plaintiffs could show the decision was tainted by disloyalty, bad faith, or gross negligence in the decision-making process, none of which are implied by simply choosing a lower-yield strategic project.
Hence why no one ever gets sued for this. It doesn't happen. It lives in the minds of HNers and Redditors to provide a very convenient excuse for their employers, or in general companies, making abhorrent decisions purely based on feels and short-term next-quarter profits/stock price, regardless of the negative externalities they inflict on soeciety.
If you're venture based and were expecting another round sometime soon. With higher interest rates there were more compelling alternatives for LPs than to invest in Venture, causing a trickle down chilling of the fund raising environment for venture backed companies and requiring them to come up with accelerated plans to reach profitability - including cutting staff and optimizing for survival over growth.