Equity
What is Equity?
Equity represents ownership in a company, typically in the form of stocks or shares. When a person or entity owns equity in a company, they have a claim to a portion of its assets and profits. In the context of startups, equity is often used to incentivize employees, attract investors, or as a form of currency in mergers and acquisitions.
Ways Equity is Used in Startups
- Employee Stock Options: Startups often grant stock options to employees as part of their compensation to align interests.
- Fundraising: Startups sell equity to raise capital during funding rounds.
- Founders’ Ownership: Equity represents the founders’ stake in the company, which may dilute as the company raises funds.