I have a few investors who are looking to fund my startup. Normally, how does the compensation work between the startup and the investor? Is it similar to the stock market where the investor buys a percentage of the company in stock and can 'cash out' at any given point and take that percentage of the company back? Or is it they make that percentage in sales until a certain predetermined profit is acquired, or until they want to sell the percentage back to the company?
@Taylor Look into convertible debt or note. What the easy explanation is. That an Angel is given a percentage of equity if and when you raise a round beyond a seed round. This could be a series A or greater. The note would then convert to X number of common stock giving them X percentage. Thats the high level view. It gets a lot more complicated but to get you started you can look at: http://techcrunch.com/2012/08/31/thefunded-founder-institute-and-wilson-sonsini-debut-startup-friendly-seed-financing-vehicle-convertible-equity/
That should be able to get you started from there. I would also suggest that you find an attorney that works with startups. Don't find just a general kind of guy. Make sure the attorney will work on a fixed fee basis and defer some of their costs to if and when you get that bigger, later round of funding.