Equity Investment Simulation: Illustrating Dilution

Post by jeffreymcmanus » Mon, Nov 21, 2011, 8:42 PM UTC

lsc wrote: post #9

jeffreymcmanus wrote: post #6

I don't get why this expresses stuff in terms of percentages instead of absolute dollar amounts. I can't buy a house with 15% of a company but I can buy a house with a million dollars.

if you own less than controlling interest in a company that has not gone public, my understanding is that you only own anything at all at the whim of the person (or group of people) that does have controlling interest; My understanding is that there is really no way to make it so that the people that own the company, legally, can't screw you if they want. The whole system is based on trust. The smaller your percentag…

Post by lsc » Mon, Nov 21, 2011, 10:12 PM UTC

onemoreact wrote: post #10

lsc wrote: post #9

Earlier quoted context omitted.

if you own less than controlling interest in a company that has not gone public, my understanding is that you only own anything at all at the whim of the person (or group of people) that does have controlling interest; My understanding is that there is really no way to make it so that the people that own the company, legally, can't screw you if they want. The whole system is based on trust. The smaller your percentag…

If you take reasonable precautions. A) There are few legal ways of really screwing over investors. B) You can sue for most of the legal ways. Unforgettably, it's vary easy to screw yourself over when dealing with a start up. But, the real problem IMO is that employ's generally have less leverage and can't afford to sue. "We got an offer that's very good for us and acceptable to the investors. So, sure you get nothing…

Post by onemoreact » Tue, Nov 22, 2011, 3:10 PM UTC

lsc wrote: post #13

onemoreact wrote: post #10

Earlier quoted context omitted.

If you take reasonable precautions. A) There are few legal ways of really screwing over investors. B) You can sue for most of the legal ways. Unforgettably, it's vary easy to screw yourself over when dealing with a start up. But, the real problem IMO is that employ's generally have less leverage and can't afford to sue. "We got an offer that's very good for us and acceptable to the investors. So, sure you get nothing…

As for A, how do I keep the majority shareholders from voting to bring in expensive management, rent expensive offices and equipment, then issuing more stock when they run out of money and repeating the process until I am diluted to nothing? I mean, I've worked at many places where that looks like the company plan; they spend all their revenue, which is fine, but then they act like the investment money is revenue as…