My question is inspired by Dragons' Den, an investment TV show in Britain, where an entrepreneur asks investors for money.
The entrepreneur (E) goes on the show and says, "I want 100k for 25% of my company".
The investor (D) agrees to "buy 25% of the company for 100k" and sometimes comments that "your company is (or is not) worth 400k".
To me this sounds like a transaction, where E already owns a company worth 400k and can therefore pocket the money from D and give D 25% of the profits every year.
However what actually appears to happen is that the 100k is invested into the company to fund some growth plan. So is it actually the case that E's company is worth 400k only AFTER the transaction? Is the 100k added to the balance sheet as cash and would the other 300k be listed as an IP asset?
And if this is the case, why do they make the apparently inaccurate statements on the show, which make it look like a sale of shares instead of an investment? (Maybe this is similar to issue/sale of stock on the primary/secondary market?)