Private equity firms bought lots of retailers and now many of them, like Gymboree, Claire’s Stores, Rue 21 and Toys R Us, have too much debt to build e-commerce sites, as WSJ reported.
Posted inPrivate Equity Updates
Private equity retailers falling
There has been a robust debate on this topic with folks like Fred Wilson , Paul Graham and Seth Levine all chiming in. To clarify, there is no question that as an entrepreneur you would prefer uncapped convertible debt to equity. As Josh and many others point out, this is typically not a fair deal for the investors and many investors won’t do it, or will only do it for people that they are blindly in love with. Also, Seth raises some interesting points about ecosystem health, though most entrepreneurs I know aren’t too concerned about killing the golden goose. Once a price cap has been introduced, however, Series Seed Documents are a better solution to getting the first round complete for both entrepreneurs and investors.