Shareholders do not provide value. They provide a 1 time infusion of cash in exchange for a future return of either increased value of their stock or dividends. They only infuse cash when the stocks are released either at IPO or later offering of new stock.<p>The reason stocks are sold is due to cost of capital. A company can make money in a few ways. First is they make a product or service and receive money from customers. Second, they can IPO or some other form of shareholder investments. Third they could finance their needs either with a direct loan or through bond issuance.<p>Now, most bonds are considered junk if they are from a small company, especially one where people are working out of their garage. This means the debt has a rather high rate (because people think you&#x27;re going to default). So now you&#x27;ve got to find a buyer (requires middlemen and their costs) that&#x27;s will to bet on you. Good luck (no seriously I&#x27;d prefer this over opening my company to an IPO).<p>Bank financing is hard to get for pretty much the same reason that bonds are junk. Unless you can show positive cash flow for a few years (you know with your just formed startup and a dream), you probably not going to get a loan. It is due to this that often people, including Elon Musk, self-debt finance via credit cards. Again, ridiculously expensive lending terms.<p>Let&#x27;s say you are making money. That&#x27;s great, you&#x27;re in the top 40% of startups. You are now constrained by the amount of money you make. If you make 100k a year, but need 1mil to bring a new product to market, we&#x27;ll see you in 10 years (probably more like 13 with taxes removed over those years).<p>This brings us to stocks. Find people that are a) suckers, b) chumps or, and good luck o&#x27; bearer of dreams, c) actual believers in your product&#x2F;service. They buy at the IPO price. Your company gets a percentage because the financial house that offered your stock takes a chunk. VCs might cash out after their sale moratorium ends. But after all of this you have a pile of money. That 1mil product is probably doable now. So is an office complex with open floors, and a coffee machine and free lunches and a dog kennel for when your employees just need to feel something that proves they&#x27;re alive.<p>You also have an asset to back bonds. So you can, after a small period of time, issue bonds.<p>At no point did the shareholders add a penny in value to your product directly. They are just there hoping to the FSM that they can leave your stock at some point with a gain. They DO GET TO BITCH. They can have you legally removed from your own company because you have a long view that says in 10 years doing X, Y, Z will increase this companies value 100 fold, but it won&#x27;t help (probably will hurt) the next 3 quarters.<p>As a stock holder I can say this about other stock holders. Fuck&#x27;em. They get 10-50% return for literally parking their money. As they have more capital related income, they should be taxed as income (outside of reasonably tax-protected vehicles like retirement plans).