I'm not sure why this analysis assumes that the startup doesn't have $5 million of debt or somehow gets back the equity they sold.
They're not in the same position they were before. If you're worth 10 million when you have five million in the bank, you are now worth 5 million without it.
If you sold half your company to get the first 5 million, why would keep working if you have to sell the other half?
They're not in the same position they were before. If you're worth 10 million when you have five million in the bank, you are now worth 5 million without it.
If you sold half your company to get the first 5 million, why would keep working if you have to sell the other half?