They are just employees on some level, but they are also typically owners with a lot of risk on the table themselves. Even if they come in with what would be “a lot” of money to most of us, it can’t compete with investment capital.
We build energy plants with investor money as an example. They don’t invest in us, but into the projects we run, so it’s a little bit different than having someone invest in us (but I’ll get to that). We don’t solely build a power plant with investor money though, we build it with a mix of investor money, loans and our own money, and that last bit just got a whole lot larger (meaning we can do much larger projects) with private equity investing into us directly. So now instead of doing a tiny mom-and-pops sort of solar plant, we can build some of the largest solar plants in the world. The payout on the other side isn’t linear either, there is much, much, more money in a single large plant than in a hundred tiny plants. Especially when you sell the product a few years after its completion.
In the current world, maybe it would’ve been better to not take private equity on board, but at the time it was done, nobody knew Putin would invade, that the global supply lines and manufacturing power would never recover from covid, or, that interest rates would go above 15% in countries where they were below 1%. Everyone knew the low interest rates wouldn’t stay, but we sure didn’t expect them to go so far above 8%.
Anyway, even if the world hadn’t gone to shit, our company would still have been 10-20 people and not in the hundreds if we hadn’t acquired the massive amount of funds. Since while our founders are rather rich, they aren’t that rich, and this would’ve limited the company growth to such a significant degree that even two years of economic turmoil has us at a level we would’ve likely never reached. It’s not all gloom and doom either, people still need power after all.
So you’re both right and wrong, founders sort of become employees, but not really. How much they lean toward the employee “title” typically depends on their deals.