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  • Question about stock sharing in a company

    updated 2 years, 10 months ago 0 Member · 1 Post
  • Jessica

    January 17, 2020 at 9:17 pm

    I wonder about how a company split shares with their shareholders and get any money for their base capital (funding). Let’s start with an example. I am starting a new startup selling a teleportation device. I have the concepts and of course need money to make a prototype and sell a working version. Of course I need a large sum of money for the initial funds (what do you call the money that you give to the company the first time it was built?). Then comes the shares. Based on some negotiations with my two other co-workers, we all will fund the company with 1000$ of money, with the stock share 40%, 30%, and 30% of that 1000$. As I saw how many people run their startups today, I learnt that the first thing that they did is selling their dreams to so-called angel investors or ordinary investors. They would receive a large sum of money if the investor is willing to fund them. My question is, how can I calculate the stock that I can give to the investors, for how much money they need to provide to me? If I’m not mistaken, if I have 40% shares with initial funding of 1000$, I “own” 400$ of the company’s money. If an investor that is incredibly rich then is willing to give us 100000$, what should I do? There are two ways that I think a founder can get money, from stock, and from salary they give to themshelves. Now I saw a running startups nowadays succesfully request a lot of money from venture capital companies (I hope the term that I use is right). 2 million dollars for example. Logically, because I am the founder, and I do not have 2 million dollars, and because my company probably don’t worth 2 million dollars, my stock share will be just drop very low. And if my stock share goes very low, I will no longer be the major party. I will get dividend based on the stock I have but it will probably just few. Is this correct? Is it possible that I sell my stock to an investor and give them lower shares than it should be? (And is this legal?) Can someone give me an example about this? And also some best practices that people usually do? I apologize for my English, I do not quite know a lot of business terms in English. Thank you in advance!! – by /hq/gregoriusutama – –

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