Legal & Equity
Equity
Also Known As
OwnershipSharesStock
Equity represents ownership interest in a company, typically expressed as shares of stock. In startups, equity is distributed among founders, investors, and employees as compensation and investment.
What is Equity?
Equity is ownership. When you own equity in a company, you own a piece of it. Equity holders share in the company's success (or failure) proportional to their ownership percentage.
Types of Equity
- Common Stock: Basic ownership (founders, employees)
- Preferred Stock: Enhanced rights (investors)
- Options: Right to purchase shares at set price
- Restricted Stock: Shares with vesting conditions
Startup Equity Distribution
| Stakeholder | Typical Range |
|---|---|
| Founders | 50-80% at start |
| Venture Studio | 30-50% |
| Seed Investors | 15-25% |
| Employee Pool | 10-20% |
Equity Dilution
As startups raise money, existing shareholders are diluted:
- Pre-seed: 100% founder ownership
- Seed: 75-85% remaining
- Series A: 55-70% remaining
- Series B+: Further dilution
Studio Equity
Venture studios take significant equity (30-50%) in exchange for:
- Idea generation/validation
- Founding team support
- Initial capital
- Shared services
- Operational involvement
Example Usage
“In exchange for building the company, the venture studio received 40% equity.”