I’m going to open now a new business with 20,000usd
I have right now 10,000usd
I need another 10,000usd
Instead of going to a bank and ask for a loan of 10,000
I’m going to divide my company
Pie itself has 20 slices:
I have in one hand 10 pieces of the pie that is mine and in a second hand i have another 10 slices.
for each slice in the second hand I’ll ask 1000usd from investors.
My company is now running
After a year I manage to make my business bigger - and now it worth not 20,000 - it worth 40,000usd
That means my 50% of the company worth instead of 10,000usd it worth now 20,000usd
and each investor doubled his 1000usd investment - now each investor has 2000usd
Each investor also now can sell his pie for 2000usd and make a clean profit of 1000usd (invested 1000 and earned another 1000usd)