Question about Raising Money for Startup

Question about Raising Money for Startup

Posted in the Venture Capital Forum

Safvan Malik

Karachi, Pakistan

#1 Mar 5, 2012
Hello

I had a question about giving up equity to raise money for the new start up company but it is a bit basic in nature.

You own 100% of a company. When a new VC comes in and buys in 10% of the company, you basically GIVE UP 10% of the ownership. That is like selling shares and the money given to you should belong to you for your own personal use.

Why would an entrepreneur startup a company give up ownership and then use the same money to grow the business?

This is question I have been looking an answer for.
Thanks
Malik.
Best TR

Santa Barbara, CA

#2 Jun 30, 2012
A VC is not buying your personal shares, he is buying company shares. Therefore, the money belongs to the company.. who's purpose is to make the shareholders money.. ie. increase share value.

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