system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: Where do people get the capital to start big, expensive businesses like cruise lines?

I've always wondered this. I can't imagine a bank would be willing to give someone a multimillion dollar loan, so are all the people in these businesses already incredibly wealthy? Where does the money come from?
gpt
Starting a large, capital intensive business like a cruise line fundamentally requires three things (1) up front equity investment (cash you already have), (2) leverage (borrowed money) and (3) a solid management team. 

1.  You can't can't borrow money (point 2) unless you have some skin in the game.  This cash can come from many sources.  If you're an individual it could be family wealth or wealth you built up by working for someone else (think c-suite executives that leave large corporations to start something on their own).  More likely, the money comes from cash reserves of an existing business (for example, when GE starts a new line of business it draws on cash from its other divisions) or private equity funds.  Private equity funds are pools of cash which pension funds, sovereign wealth funds and (to a much lesser extent) wealthy people commit to a management company (think KKR, Carlyle, Apollo, TPG, Cerberus and Blackstone) to invest.  

2.  Nobody makes money in capital intensive businesses by putting up all the money themselves.  You need to borrow money to maximize your return.  This is "leverage" (think about the term a "leveraged buy out").  Leverage is different from seeking money from a private equity fund or putting in your own money because debt must be paid back, versus equity has no guarantee of return.  If the business fails, the lenders get to pick over the pieces first and the equity is probably worth nothing.  Generally speaking, for a business with tangible assets (like aircraft, cruise ships, trucks, big machinery, etc.) you can leverage the business 4 to 1.  This means if you put up $100 million in cash, you can buy/start a business that takes a $400 million investment.     If that business is worth $500 million a couple years later, you can sell it, pay down your $300 million in debt and have $200 million in "equity" left over (ie you put up $100 million in equity and now its worth $200 million).  Conversely, if the business is not so successful and its worth only $300 million in a couple years, the equity is worthless and the lenders get their $300 million back.  Lending money is pretty much what wall street is all about.  People think about trading stock, derivatives, etc. when they think of wall street, but forget that the bond market dwarfs all those other markets.  You go to a commercial bank with a huge balance sheet (JP Morgan Chase, Citi, Bank of America and Wells Fargo) to get your "bank debt" borrowing.  You then get an investment bank (Goldman, JP Morgan, Morgan Stanley, and the ibanking sides of the commercial banks noted above) to have them market bonds to investors.  Generally, the bank debt has a lower interest rate, but gets its money back first.  The bonds have a higher interest rate, are owned by a diverse group of investors, and get paid back second.  

3.  You can't get private equity backing or borrow any money unless you have a solid management team to create a compelling investment story.  Think about how both Google and Facebook, while owned and theoretically run by young founders, brought in seasoned management professionals to lend credibility to their operations and give confidence to wall street that they won't totally fuck everything up.  

Note - At work, didn't have time to proof this.