Deal Terms
Equity
Ownership in a company, represented as shares. In venture capital, equity is the primary mechanism through which investors participate in a company's upside.
Equity represents ownership in a company. Shareholders who own equity are entitled to a proportional share of any value created when the company is sold or goes public. In venture capital, investors receive equity (typically preferred stock) in exchange for their capital. Founders and employees hold common stock. The key distinction: all equity is not equal. Preferred stock (held by VCs) has rights and preferences that common stock (held by founders and employees) doesn't — including liquidation preferences, anti-dilution, and board representation. Understanding your equity — what type you have, what preferences senior shareholders hold — is essential for any startup founder or employee.