What is equity in startups and how does it work?

What is equity in startups and how does it work?

Equity in startups refers to the ownership stake that founders, employees, and investors have in the company. It represents a claim on the company's assets and earnings.

How is equity typically divided among founders?

Equity is usually divided based on the contributions of each founder, including their skills, experience, and the amount of capital they invest. It's often negotiated at the start.

What are stock options and how do they benefit employees?

Stock options give employees the right to purchase shares at a predetermined price, allowing them to benefit from the company's growth and success.

What happens to equity if a startup gets acquired?

In an acquisition, equity holders may receive cash or shares in the acquiring company, depending on the terms of the deal. The specifics can vary widely.

Can you explain vesting schedules?

Vesting schedules determine when employees earn their equity over time, typically to encourage long-term commitment. Commonly, they last four years with a one-year cliff.