Let’s say Jane creates a company and owns 100% of it. Jane then decides to give John 25% of the company in exchange for $100,000. Does this $100,000 go into the bank account of the *company* ? Or does it go to Jane, the *individual*, for giving up a portion of her company?
On shows like Shark Tank, the sharks frequently ask the contestants what they plan to do with the shark’s money if they invest, implying that the money will go into the bank account of the *company*. If that is the case, how does Jane, the *individual* who worked hard to create the company, get compensated for the portion of the company she used to own that has been transfered to this new investor?
In: Economics
When an investor like in Shark Tank “invests” in the company, new shares are created for them and they buy those shares from the company.
So the founder will still retain the total number of shares they originally had, they will just own a smaller % of the company as the company now has issued more shares.
Other than a salary, the founder gets paid at the time of an exit when some other company buys out their own personal shareholding in order to get control over the company.
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