Chapter 1: The Basics
💸
Day 2: The Money Problem
Robert has a dream. The bank has bad news. Enter: investors.
2 min read
📖 Robert Does the Maths
Robert's one tea stall was pulling in ₹2 lakh a month. He crunched the numbers on a napkin: ten stalls = ₹20 lakh a month. Retirement sorted. Dreams achieved.
Opening 10 stalls: ₹50 lakh (equipment, deposits, staff, training, signage).
Robert's savings: ₹5 lakh.
The gap: ₹45 lakh. Also known as: the problem. 😬
Robert's one tea stall was pulling in ₹2 lakh a month. He crunched the numbers on a napkin: ten stalls = ₹20 lakh a month. Retirement sorted. Dreams achieved.
Opening 10 stalls: ₹50 lakh (equipment, deposits, staff, training, signage).
Robert's savings: ₹5 lakh.
The gap: ₹45 lakh. Also known as: the problem. 😬
Four Ways to Raise Money
Option 1: Own Savings 💰
₹5 lakh available. ₹45 lakh needed. Not going to happen.
₹5 lakh available. ₹45 lakh needed. Not going to happen.
Option 2: Bank Loan 🏦
₹45 lakh loan at 12% interest = ₹5.4 lakh annual interest. Risky if business has a bad season.
₹45 lakh loan at 12% interest = ₹5.4 lakh annual interest. Risky if business has a bad season.
Option 3: Friends & Family 👨👩👧
Robert's uncle George might chip in ₹5 lakh. His friend Sam might add ₹3 lakh. But this only gets to ~₹15 lakh. Still short.
Robert's uncle George might chip in ₹5 lakh. His friend Sam might add ₹3 lakh. But this only gets to ~₹15 lakh. Still short.
Option 4: Invite Investors! 🤝
What if Robert could ask anyone to invest — and in return, give them a small slice of the company? Brilliant. This is exactly what shares are.
What if Robert could ask anyone to invest — and in return, give them a small slice of the company? Brilliant. This is exactly what shares are.
The Brilliant Idea: Shares!
Robert divided his company into 1,000 equal pieces.
Each piece = 1 Share.
He priced each share at ₹500.
1,000 shares × ₹500 = ₹5,00,000 — but wait, he needs ₹50 lakh!
So he created 1,00,000 shares at ₹50 each = ₹50 lakh total.
He kept 60,000 shares himself (60% ownership = control).
He offered 40,000 shares to outside investors (40% ownership = their investment).
Each piece = 1 Share.
He priced each share at ₹500.
1,000 shares × ₹500 = ₹5,00,000 — but wait, he needs ₹50 lakh!
So he created 1,00,000 shares at ₹50 each = ₹50 lakh total.
He kept 60,000 shares himself (60% ownership = control).
He offered 40,000 shares to outside investors (40% ownership = their investment).
What Does an Investor Get?
🏆 Upside
- Share of profits (dividends)
- Share price goes up as company grows
- Can sell shares anytime for profit
⚠️ Downside
- Company does badly → share price falls
- No guaranteed returns
- Last in line if company goes bust
🎉 The World's First Company!
The Dutch East India Company (VOC), founded in 1602, was arguably the world's first publicly traded company. It issued shares to fund trade voyages to Asia. The concept of "you give me money, I give you a piece of the profits" is literally 400 years old. We're just doing it slightly faster now. 🚢
The Dutch East India Company (VOC), founded in 1602, was arguably the world's first publicly traded company. It issued shares to fund trade voyages to Asia. The concept of "you give me money, I give you a piece of the profits" is literally 400 years old. We're just doing it slightly faster now. 🚢
🎯 Today's Takeaway:
When a business needs more money than it can borrow, it can invite investors by selling ownership stakes called shares. Investor gives money → gets a piece of the company → shares in profit and risk. This is the foundation of everything. Tomorrow: What exactly IS a share?
When a business needs more money than it can borrow, it can invite investors by selling ownership stakes called shares. Investor gives money → gets a piece of the company → shares in profit and risk. This is the foundation of everything. Tomorrow: What exactly IS a share?