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Before I ask my question, I would like to tell that I am not from a Business background and therefore this might sound like a stupid question to most.

Recently, I watched a film based on Steve Jobs Biography, where at a point he meets an investor an negotiate like this

 $90,000 Investment with $300,000 Valuation and $250,000 Credit Line with 10% Interest 
 to be paid back in full once we met net revenue positive

obviously, I understood some fractions of it like $90,000 investment but want a clear understanding what actually deal was specially Investment with Valuation and Credit Line terms.

And also what will investor get in return for the investment of $90,000 Investment, what share of profit?

Will the investor get profit share through out the life of company or is it for limited time period?

Will investor withdraw all of his investment once company starts making profits or what?

Also what does

$90,000 investment in return for 10% Equity means

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'10% equity' Means '10% ownership of the company'. "Equity ownership" means basically stock ownership, so this would give 10% of all future profits forever, unless the person sold their shares.

So the agreement above gives the investor 10% of the company, and in return the investor provides the company with 2 things: $90k, and a loan of $300k [credit line instead of loan implies that the company can draw it when needed, like having a credit card with a 300k limit instead of a full loan of $300k immediately].

The company would also need to pay back the credit line once revenues match annual expenses.

Whether the investor can force the company or Steve Jobs to buy back his shares at any point would be a particular point mentioned in a contract far longer than you would see in a movie talking about such things.

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  • That was nice and good explanation. Thanks a lot. However, I could not understand this. "Whether the investor can force the company or Steve Jobs to buy back his shares at any point would be a particular point mentioned in a contract far longer than you would see in a movie talking about such things." Please can you elaborate a little bit May 9, 2021 at 12:28
  • If investor gets 10% Equity then remaining 90% belongs to Steve Jobs right? So, why would he ever buy his shares back at any point? Or do you mean Steve Jobs can buy 10% from Investor if something like that is mentioned in agreement? May 9, 2021 at 12:29
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    @airy The agreement for the shares was likely quite long - and inside the contract, maybe it says "if x or y happens, Apple has the right to buy back these shares" or "if a or b happens, the investor has the right to have his shares bought back for their fair value". I have no idea whether such a clause was in there; that is incredibly specific. These clauses sometimes exist, sometimes not. And the other 90% is maybe owned by Steve Jobs, maybe other investors already had a piece, maybe Steve Wozniak had some [I am not very informed on how Apple started]. May 9, 2021 at 17:05

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