Founders, Investors, and Dilution

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Founders

Picture this: you’re a startup founder. You’ve got big plans to change the world or at least make one corner of it better. But here’s the catch: changing the world costs money. You need cash to pay your team (and yourself), cover the software and servers, and possibly do marketing for money if there are no more reasonable options left at all.

You have two options: start earning right away and cover all your expenses, or sell some shares in the company to an investor, get the money now and hit the accelerator. Oh yes, there is another option - borrow money from the bank, for example. That might make sense after your company has started making money. We will focus, though, on the second option - selling shares to an investor. This is where fundraising enters the chat.

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VC Investors

Investors, be they VCs, Angels or Syndicates, aren’t mythical creatures. They’re people with jobs: specifically, finding promising startups where they can park their money for a potentially massive return. They’ve either got personal funds or are managing other people’s capital, but the goal is the same: find opportunities that scream, “I’m going to be huge someday!”

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Founders and Investors

At its core, this relationship is simple. Founders want to build a business, make life better, and make money. Investors want to support those businesses and, surprise, make money. It’s not about charity or destiny. It’s about mutual benefit. Your growth = their payday. In 99% of cases, this all boils down to one thing: the money.

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Fundraising

When you fundraise, you’re not asking for money; you’re selling shares of your company. Your pitch, in principle, should be: “Buy now while the price is low because it’ll be worth much more soon.”
For investors, your company needs to tick their boxes: stage, sector, business model, traction, market conditions, and that ever-elusive FOMO (Fear of Missing Out). If you hit the right notes, they’ll buy your vision and your shares.
Easy, right? Not so fast. Timing, luck, and how compelling your story is play huge roles. But let’s not overcomplicate things for now.

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Shares and Dilution

Shares are slices of ownership in your company. As the founder, you own a big chunk (at least for now). When you raise money, you’re selling some of those slices. Investors buy in because they believe your empire is going to be worth a lot more down the line, and their slices will grow in value.

Every time you raise money, new shares are issued. That means your original slice of the pie gets smaller. It’s called dilution, and yes, it hurts. But here’s the silver lining: as your company grows, so does its valuation. If the pie gets bigger and more valuable, your smaller slice is worth a lot more.

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Valuation

Fundraising is a game of trade-offs. You give up some equity, but if the valuation rises, everyone wins. The goal is to build something that’s so successful that no one cares their percentage went down because the total value skyrocketed.

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“Do I Have to Pay Investors Back?”

Short answer: no.

Long answer: it’s complicated.

When you raise VC funds, you’re not taking out a loan, you’re selling equity. The money you get is yours to spend, and the shares are now theirs to keep. No repayment plan, no interest rates.

// To be fair, investments such as convertibles can look like loans (because they are), and even under certain circumstances, the investor can demand repayment with interest. But we are not going to fill your head with all the subtleties yet, are we? Either way, it's rare, so forget it for now.

However, investors aren’t running a charity. They expect your company to grow like crazy so they can sell their shares later at a massive profit, say 10x or 100x the investment amount. Why that much? Because most startups fail. For every unicorn that makes it big, dozens crash and burn. The ones that succeed need to deliver returns big enough to make up for the failures and then some.

So, your job is to build a company that is so successful and fast-growing that their investment multiplies a hundredfold. No pressure.