If the business grows it might be worth say 5m in a few years time. When the 10% equity stake is sold it is then worth 5m x 10% = 500,000 giving a profit of 500,000 -100,000 = 400,000.
In addition the business might pay dividends which the equity holder is entitled to 10% of.
When you see a shark on the show Shark Tank invest X amount of dollars into a company, how do they make money? I understand the deals where there is a royalty, but what about straight equity deals?
Let's say, for example, Mark Cuban pays $100,000 for 10% of a company (no royalty on sales - just pure equity). How does he make money later?
