What is “OPM”? And why is it so sought after?
OPM is “Other People’s Money”. It is a most desirable commodity because if you use OPM rather than your own cash for your business investments, your return on equity (ROE) will increase substantially. Imagine if you don’t put in any equity, your ROE which is profit divided by zero is infinity!
The smart entrepreneur will try to borrow as much as he can in whatever form. He will only give away the shares in his company as a last resort unless those shares are valued at a substantially higher price than his initial cost.