Equity
Definition
Equity: Equity represents ownership in a company, typically through shares of stock. Founders receive equity at formation, employees through stock options, and investors in exchange for capital. Equity value is realized through dividends or liquidity events like acquisitions or IPOs.
Example Usage
“Early employees received 0.5% equity through stock options that vested over four years.”
Common Misconceptions
Related Terms
Vesting
Vesting is the process by which employees earn their equity over time. The standard vesting schedule is 4 years with a 1-year cliff, meaning no equity...
Stock Options
Stock options give employees the right to purchase company shares at a fixed price (strike price) after vesting. Options are a common form of equity c...
Cap Table
A capitalization table (cap table) is a spreadsheet or database showing the equity ownership of a company, including shares held by founders, employee...
Dilution
Dilution occurs when a company issues new shares, reducing existing shareholders' ownership percentage. In each funding round, founders and early inve...
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