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Probably off-topic, but something I've never understood reading these things: How does this funding actually work? From what little I know (the stock market) you'd sell an equity stake in your company for a certain amount and you have money in your personal bank account. But it sounds to me like all these funds somehow go back into the company?? how?? what am I missing?
Probably off-topic, but something I've never understood reading these things: How does this funding actually work? From what little I know (the stock market) you'd sell an equity stake in your company for a certain amount and you have money in your personal bank account. But it sounds to me like all these funds somehow go back into the company?? how?? what am I missing?
Probably off-topic, but something I've never understood reading these things: How does this funding actually work? From what little I know (the stock market) you'd sell an equity stake in your company for a certain amount and you have money in your personal bank account. But it sounds to me like all these funds somehow go back into the company?? how?? what am I missing?
If you want to know more, read Venture Deals[1]. It's very thorough and well written.
[1] http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...
Probably off-topic, but something I've never understood reading these things: How does this funding actually work? From what little I know (the stock market) you'd sell an equity stake in your company for a certain amount and you have money in your personal bank account. But it sounds to me like all these funds somehow go back into the company?? how?? what am I missing?
However, the way funding events work in real life is that new shares are created by the company and then sold to the investors.
As a very math-simple example, I have 1m shares in my company, and I own 100% of them. Some VCs want to take a ~33% share of the company for $5m. My "board" (me) creates 500k new shares, and sells/gives them to the investors for $5m. Now there are a total of 1.5m shares, of which I own 1m, and the VCs own 500k.
EDIT: sometimes, though, a founder will sell part of their shares to the VCs during a funding event. That's usually to help give the founder a little liquidity and cash.
Probably off-topic, but something I've never understood reading these things: How does this funding actually work? From what little I know (the stock market) you'd sell an equity stake in your company for a certain amount and you have money in your personal bank account. But it sounds to me like all these funds somehow go back into the company?? how?? what am I missing?
Probably off-topic, but something I've never understood reading these things: How does this funding actually work? From what little I know (the stock market) you'd sell an equity stake in your company for a certain amount and you have money in your personal bank account. But it sounds to me like all these funds somehow go back into the company?? how?? what am I missing?
Okay, so yes, you are mechanically correct in that if you sold 10% of your shares for $1m, you would get the cash not the company. However, the way funding events work in real life is that new shares are created by the company and then sold to the investors. As a very math-simple example, I have 1m shares in my company, and I own 100% of them. Some VCs want to take a ~33% share of the company for $5m. My "board" (me)…
Probably off-topic, but something I've never understood reading these things: How does this funding actually work? From what little I know (the stock market) you'd sell an equity stake in your company for a certain amount and you have money in your personal bank account. But it sounds to me like all these funds somehow go back into the company?? how?? what am I missing?
Okay, so yes, you are mechanically correct in that if you sold 10% of your shares for $1m, you would get the cash not the company. However, the way funding events work in real life is that new shares are created by the company and then sold to the investors. As a very math-simple example, I have 1m shares in my company, and I own 100% of them. Some VCs want to take a ~33% share of the company for $5m. My "board" (me)…
Earlier quoted context omitted.
Sorry about that, should have only popped up if you left the page :( Gonna have to talk to bounceexchnage.com about this... Thanks for the heads up.
FWIW I opened it in a background tab. Still completely unacceptable. (EDIT: as in, your site is giving a value proposition and I don't accept it if it includes a massive popup)
Probably off-topic, but something I've never understood reading these things: How does this funding actually work? From what little I know (the stock market) you'd sell an equity stake in your company for a certain amount and you have money in your personal bank account. But it sounds to me like all these funds somehow go back into the company?? how?? what am I missing?
Okay, so yes, you are mechanically correct in that if you sold 10% of your shares for $1m, you would get the cash not the company. However, the way funding events work in real life is that new shares are created by the company and then sold to the investors. As a very math-simple example, I have 1m shares in my company, and I own 100% of them. Some VCs want to take a ~33% share of the company for $5m. My "board" (me)…
I had never thought of the company itself creating more shares, this is what I was missing in my thought process.