Behavioral match-funding

In corporate finance, the concept of match-funding – the financing of long-term assets with long-term liabilities and short-term assets with short-term liabilities – is a fundamental precept.

This approach that seeks to tie the timing of cash flows with funding sources that need to be repaid over particular timeframes, is not always diligently followed outside the traditional confines of corporate balance sheet management.

For instance, in much of venture capital – a financial category that is almost by definition long-duration – the idea of startups failing fast is common enough to draw attention.

An old article presents the issue and elicits an elegant response, in which the nuances of timing and the startup are properly framed.

Geekwire

(And maybe not only founders.)

We tend not to think of startups, or new projects or directions, as assets in the same way we consider receivables or property.

But options are an asset class… and if long-dated and out of the money, it’s probably best not to purchase these with a charge card.