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Basic Terms

This section presents the basic terms with which companies raising capital need to be familiar. A more detailed discussion of the valuation of startup companies and various calculations in connection with these terms is given in Chapter 9.

Sale of Shares by Shareholders Versus Investments

The main difference between the sale of shares by shareholders (a “secondary offering”)—a transaction to which the company is not a party—and raising capital for the company (i.e., importing money into the company) is that in the latter case the company allots new shares to investors (i.e., adds shares to the company's allotted share capital), against which it receives an investment, usually in cash which it can use for its business.


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