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Lately I've been curious on how exactly does investing in a product works, and I've been thinking about this scenario:

Let's say I'm creating some mobile application and I manage to get $1m of investment money. In the following year, the application turns out to be a huge success and I get an offer of $30m to sell it. If I decide to sell it, where is the investor involved in that process? Does the investor get a part of that $30m?

I would also appreciate some useful links that explain the process.

Almost nobody would just give you a pile of money with no expectation of return. In most cases you exchange equity in the company for the investment. A simple example might be that I estimate your idea/company to be worth $4M currently, so for $1M I want 25% equity. When you sell for $30M, I get 25% of the proceeds. If you go belly up, I likely don't recoup my investment, but 25% of whatever assets can be sold.

There are other arrangements, too. My investment might earn a royalty on every sale you make, without me having any equity. The investment could just be a loan that you repay with interest. There are many options and nuances; that's why lawyers are usually involved.

How much power the investor has depends on how much you give them in exchange for their investment. There are plenty of stories of founders getting themselves ousted by investors after giving up too much control.

Typically, if you create a business that wants investors, you will issue stock in the company. One unit of stock is called a share. You decide how many shares there will be and how much each share is worth. The total value of all the shares represents the market value of your business.

Say you issue 1 million shares in your company, and you value each share at $4. That makes the market value of your company $4 million. If someone comes along and wants to invest $1 million in your company, it's a simple matter of selling them 250,000 shares.

At some point in the future, your company is doing really well and someone offers you $30 million for it. There are 1 million shares, so that means each share is now worth $30. Your investor owns 250,000 shares, so their $1 million investment is now worth $7.5 million. You still own the other 750,000 shares, so you get the other $22.5 million.

That's a really simple example, but it illustrates the basic idea of investing in stock of a company.

There's a distinction between selling the company and selling your stake in the company. Let's say you gave the initial investor a 10% state in exchange for the $1m. Then you have a 90% stake in the company.

If you sell this stake, then the new buyer will now have a 90% stake, and the original investor will still have a 10%, but no money. However, if the new investor is willing to buy your stake, then they're likely willing to buy the other 10%, in which case the original investor would have the option of giving up their 10% in exchange for what the new buyer is offering.

If you sell the company, then the original investor would lose their stake, but get 10% of the sale price; they would in essence be forced to sell their stake. The original agreement will likely have terms spelled out as to under what conditions this is allowed. Many agreements give the original investor veto power, or give a minimum price the company can't be sold less than.