I know stocks are traded to raise funds and help operate the business better, but can companies use the money to directly pay their employees? Or does all payroll come from revenue?
In: 8
Usually when a company is in the startup phase, all payroll is covered by investors. First you have the angel/A series/B series investors, they provide a starting amount of money to develop the initial product. This covers payroll and operating expenses for the first few years.
Then there is the IPO and shares are sold to publicly to any investors who want them. Hopefully thing brings in a huge amount of money. This will continue to cover operating expenses and payroll until the product is profitable.
Once the product is profitable and the company exits start up phase, payroll is covered by revenue. However, the company will not have sold all the shares. Then will have held some back to give to employees. Employee compensation will be a combination of money + shares.
Latest Answers