🎯 Goal: Understand fundraising trades equity for money to grow; new capital lowers existing owners’ share (dilution).
To grow, a company can raise capital: investors give money for equity (part-ownership). New capital → existing owners’ share is diluted, but the whole "pie" may grow bigger.
Let’s explore
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Fundraising = trade equity for money to grow faster.
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Dilution: more shareholders → each holds a smaller slice, but a bigger pie.
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Founders weigh: keep more equity vs take capital to grow.
Practice activity
🧮 You own 100%, raise capital selling 20% to an investor — what % do you keep?
Worked example: You own 100%. Sell 20% to an investor for money → you keep 80%. Your share is diluted, but with new capital the company can grow, so 80% of a bigger company may be worth more than 100% of a small one.
Quick quiz
1. Raising capital means?
→ Trade equity for money to grow
2. Equity is?
→ Part-ownership of a company
3. Own 100%, sell 20% → keep?
→ 80%
4. "Dilution" means?
→ Each owner’s share falls as shareholders are added
5. Why might accepting dilution be worth it?
→ New capital makes the "pie" bigger
🎯 Real-life mission
Explain: if you sell 20% equity to an investor, how much do you still own.