When an investor comes into your business, there are really two fundamentally different ways to structure it — and many business owners don't know the difference until they're in the middle of the negotiation.
Short answer: In a capital increase, the business issues new shares to the investor, and the money goes into the business as new capital — typically for growth, product development or marketing. In a sale of existing shares, the investor buys some of the shares you (or the other owners) already own, and the money goes to you personally. The two models can also be combined in the same round.
Capital increase: capital for the business
In a capital increase, the business's total number of shares increases, and the investor subscribes to the new shares in exchange for a contribution. All existing owners are diluted proportionally, but in return the business receives fresh capital that can be used to accelerate growth. This is the most common model when the purpose of the investment is genuinely to fund the business's development.
Sale of existing shares: capital for you
Here, you (or another existing owner) sell some of your own shares directly to the investor. The business itself doesn't receive the money — it goes to whoever is selling. This is typically used when an owner wants to free up some of the value already created, without selling the entire business — for example, to reduce personal risk or free up capital for other purposes.
Why the difference matters so much
Many investors want to see their money go toward growing the business — not toward making the founder rich upfront. If you ask for a round that's purely a sale of your own shares, it can signal that you're already looking to exit, which can make investors wary. Conversely, a small portion of existing-share sales combined with a capital increase can be entirely legitimate — it lets you take a bit of risk off the table while the business still gets the capital it needs.
How to structure it correctly
Be clear from the start about how much of the investment goes to each model, and why. This should be clearly stated in the term sheet and the subsequent shareholder agreement. If you're unsure what makes the most sense for your situation, it's a natural topic to raise in a no-obligation call with an advisor.
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