I've been developing websites for about 12 years now and have just started getting into the idea of creating a startup and want to know more about investors. Why would people choose investors over just developing the site by themselves and having a larger piece of the pie? How do startups determine how much money they will need to seek? And the question I'm most curious about is how is all of the money spent? If i were to seek $1 million I'm assuming I wouldn't get to keep 1/2 or even a 1/4 to compensate myself and spend the rest on resources. What happens if the startup is a bust, is the investor pretty much screwed and I'm not liable to pay him back? Lots of questions, so answer as many as you could, or if there is a site/article that covers a lot of this please let me know
Most of the money goes into hiring a good staff, at least at first. You don't get to keep any of the invested money because it belongs to the company. You might get compensated or just keep equity in the company which you could sell if you wanted to. If it's a bust they're screwed because they took the monetary risk. Most of them will go bust or at least struggle to be profitable, but some of them will catch fire. Their whole goal is to make more from the really successful projects than they lose on the unsuccessful ones.
you give up a lot of control when taking outside investment. i suggest going the bootstrap route for as long as possible. investment can help you grow, but seek investment AFTER you're profitable. you'll get a much better deal.
Ill add to that that you run a huge risk having to tell the angel investor what your site is all about first. You cant do that too many times without your secret idea getting out!
Nobodies don't get investment you need to get well connected, you need to be networking with the right sort of people. Notice how people like Mark Zukerburg went to Harvard University and the Google founders went to Stanford University.
I don't think you can get 1 million in 1 shot. The money will come in batch. And you have no salary but only have piece of share of the venture.