aren't they supposed to be taking venture investments and not loans?
how can they possibly go bankrupt if they haven't taken any loans?

@FedorShabashev Basically, if the burn rate is greater than investments/profits for too long right?

@Grinchtachu That’s not bankruptcy. That’s liquidation

@FedorShabashev I must admit I was using them as synonyms. Searching online, it seems bankruptcy refers to individuals while liquidation refer to companies, but are otherwise the same ? Can I ask how you would frame the question then if I'm missing the distinction?

@Grinchtachu
GPT provides a good answer:

The concepts of company bankruptcy and liquidation, though related, differ significantly in their implications and processes.

1. Company Bankruptcy:

   • Bankruptcy is a legal process where a company declares its inability to pay off its debts to creditors. It's a broader term that can encompass various scenarios, including restructuring or reorganization.

   • In the United States, this is often done under different chapters of the Bankruptcy Code, such as Chapter 11, which involves reorganizing the business's debts and assets.

   • The company might continue operating under bankruptcy, but under the supervision of a court and possibly a bankruptcy trustee. The goal is often to restructure the company's debts and obligations, providing a way for it to become financially viable again.

2. Company Liquidation:

   • Liquidation refers specifically to the process of winding up a company's affairs, selling off its assets, and using the proceeds to pay off creditors. This process typically marks the end of the company's existence.

   • Liquidation can be voluntary (initiated by the company’s directors or shareholders) or compulsory (forced by creditors through a court process).

   • Unlike bankruptcy, which may aim for the company's survival and restructuring, liquidation is about dissolving the company and paying off debts with whatever assets are available.

Regarding your second question, can a company go bankrupt without having loans or other liabilities? Technically, it's unlikely. Bankruptcy is specifically about being unable to meet financial obligations. If a company doesn't have any liabilities, it doesn't have debts to default on, which is a key condition for declaring bankruptcy. However, a company might still face financial difficulties due to other issues, like operational losses, which could lead to a decision to cease operations or liquidate, but this wouldn't be classified as bankruptcy in the traditional sense.