Simple n00b question about funding

[utnick]

Lets say I start a startup on my own. Some VC comes along and decides to fund my company 10 million for 40% equity.

Do I personally get to keep any of that 10 million? If the startup fails do I owe him his 10 mil back? Can I pay myself a huge salary?

( i know this is a bad attitude to have, and i'm just using this as an example to illustrate my question. Trying to learn more about the process )

[pg]

No, no, and no.

[mikesabat]

No, absolutely not. VCs aren't stupid and you sign a contract with them. If you were a VC would you leave that door open?

http://www.venturehacks.com - read this blog.

[utnick → mikesabat]

yea i kinda figured that

but its hard to figure what some of these web 2.0 companies are doing with millions of funding if not paying the founders big 6 figures

[aston → utnick]

I think you could swing paying yourself 6 figures with an investment of $10 million assuming you were one of only a few employees.

[nostrademons → utnick]

Hiring 10-20 people and holding enough cash in the bank that it'll last them for 2 years or so.

[wlievens → utnick]

Employing people is very, very expensive. If you run a company with more than say 3 people, you're also going to be needing an office. And computers.