[helpful]

Your latter argument is incorrect. Let's say there are 200 shares issued. Let's say you are a solo founder and own 100 percent of the company. Investor comes in and wants 20%. You would issue him 50 shares and that would dilute your percentage to 80%. Total shares issued now is 250 shares.

Your shares don't change and you don't just get issued new shares. That's why in startups people reference actual shares of stock rather than percentages. Percentages is just a way for people to communicate. That said, in an actual startup we're talking about tens of thousands to millions of shares initially rather than this dumb down version.

As for why your version isn't always the case, it's obvious that if everyone shares get increase accordingly, and retain their percentage ownership, there'd be no new shares/percentage going to new investors of employees