little bit more reward than senior, but they have less risk than this equity tranche.

They're not supposed to, but they figure out a way.

But definitely until about 2006.

Let's say some of these borrowers start defaulting.

So AAA corporate bonds.

A tranche is just a bucket, if you will, of the asset.

Or private placements in some way.

What is a discounted cash flow?

So I use it essentially just to build a big vault, right?

They tend to be creative. They tend to be entrepreneurial.

Essentially these were private equity sales.

You just feel richer.

But anyway, I'll try to move on without my pen.

Boy, Sal, that sounds amazing.

An ongoing free press investigation turned the attention to who owns the voting machine companies.

You pay this guy 21 million or this group of guys or gals 21 million.

And then this top tranche, you could call it the most junior tranche. it's sometimes called the equity tranche.

One of the interesting thing about costs is that in the old days costs and revenue, the minute you started your company, your investors said oh, we know how to track all this.

So if there are 1 million shares, each share will get 1 millionth of the cash flow stream that's entitled to this entity.

And maybe they give this tranche, and I'm making up things, but maybe they give it a AA rating.

I don't to put too much stock in these statistical models then this entity will just have that property auctioned off or sold.

So out of the 100 million every year, 24 million is going to go to these guys, 21 million is going to go to these guys, and then whatever's left over is going to go to the equity tranche.

I took 100,000 of it, turned it into cash, and just went on a great one year long vacation.

So in this situation what we did is we raised out of the 1 billion we needed 400 million from the senior tranche, 300 million from the mezzanine tranche, and then 300 million from the equity tranche.

As you start putting all this into a spread sheet you actually start building the classic income statement balance sheet and cashflow we haven't even had you do yet.

Because if you have a venture that really doesn't exist yet and has no cash flow, they know that you're not going to pay the interest on the debt, so you're not going to even be able to raise debt until you are a more mature company.

But we know in the real world, if you're investing in pets.com and they tell you that they're going to pay these cash flows to you, that's not risk free.

When I had a different discount rate for my one year out cash flows and my two year out cash flows, and it was these exact numbers.

This guy is still going to get 24 million, this guy is still going to get 21 million, but now this guy is going to get 45 million.

Eventually, the right hand side of the canvas down here needs to be bigger than the left hand side, not necessarily during the first year, but if it's not, then that tells you how much money you need to raise and how much cash you need before you go cash flow positive.