If I sell a portion of my startup business to a venture capitalist for X dollars for the purpose of raising funds, is that X dollars my own personal money that I can do whatever I want with? Or am i obligated to use that money only on the company? I.e. it's company money?


1 Answer 1


It depends on how you structure the transaction.

If you want to have personal assets, you can sell some of the stock you personally hold in the business to an outside investor. If you want the business to have the assets, the business can issue additional shares of stock to the investor.

In practice, a venture capitalist will almost certainly require the latter where the money flows to the business. They generally don't want to invest in a business where the owner is already trying to cash out. And the purpose of a venture capitalist is generally to provide funding for businesses that allows them to grow more rapidly not to buy out owners and see their capital get invested somewhere else. And since venture capitalists generally have the power in the negotiations (there are far more businesses chasing venture capital than venture capitalists chasing startups), they get what they want most of the time.

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