I mean, it's not free money. The people who gave them the money expect to get the money back plus some profit. Whatever fancy financial words people like to doll that up with, it still sounds to me like debt.
It's literally not debt. Debt is when you borrow money or issue bonds with obligation to repay the principal, plus interest
This is an equity investment: the VCs buy an ownership stake in the company, which they share with the founders. They don't receive "profit"- they get a payout proportion to their ownership stake if the company is sold or retained earnings if the company issues dividends (not common)
I understand, but it doesn't seem like an interesting distinction to me. It's all just different financial ways to say the same thing: they got money from someone and will be expected to pay it back with even more on top somehow later.
