EMC forgave $400 million of debt from a startup it invested in

Last Thursday, hot business software startup Pivotal announced that it had raised $253 million from investors like Ford and Microsoft - a mega-deal that valued the company at $2.8 billion.

But a form filed with the United States Securities Exchange Commission shows that it had raised closer to $653 million, a massive $400 million gap.

So, two questions: First off, if the round was a whopping $653 million, why wouldn't Pivotal say so? Second off, where did that second $400 million come from?

Turns out, both questions have the same answer, as reported by TechCrunch. EMC, the tech mega-corporation in the midst of its own $67 billion super-merger with Dell, increased its already-considerable stake in Pivotal to the tune of $400 million.

But it wasn't your normal kind of venture deal, and this is where things get messy. Basically, Pivotal had a large amount of debt that it owed to EMC, and paid it back by giving EMC $400 million of equity in the company. Now, Pivotal is largely debt-free.

"At this point in its development, Pivotal, a 3-year old company with strong financial and customer momentum, now has no long-term debt, strategic investors, and significant cash," says a Pivotal spokesperson.

Indeed, alongside last week's funding announcement, Pivotal also announced that it had a $115 annual run rate, with the Pivotal Cloud Foundry product doing $200 million in annual bookings.

EMC, alongside VMware (itself an EMC subsidiary), were the original investors in Pivotal back when it was first spun off in 2012. GE also is said to own a 10% stake. And both EMC and VMware are going to get subsumed into the new Dell Technologies banner once that merger finally executes.

The inter-related corporate structures are pretty complex. But the fact that EMC is willing to swap debt for equity is a telling show of faith in Pivotal.