In some cases, as nl points out, it's because the strong growth and expected future profitability means the investors are happy paying the founders for value th

In some cases, as nl points out, it's because the strong growth and expected future profitability means the investors are happy paying the founders for value they've created. Other times, it's simply a case of founders transferring investors' money straight into their own pockets. It's a very, very useful skill as an investor (or employee, for that matter) to be able to distinguish the two.