#6. What you need to know about startup equity.

What it is and who's entitled to it.

Welcome to day 6 of the #100daysofVC, I hope your day is going as planned?.

In today's episode, we’ll get to know about startup equity and it’s dynamics.

In our last episode, I talked about what a “startup” and “tech startup” is, and a little bit of an African context.

I said, a startup is an organization in search of a business.

A Startup is the part of the process of creating a business before it has found a reliable, predictable revenue model.

Now we’re all aware of how limited the resources available to the founders of these are, in the early stage.

During this period, the founders need to sell the vision of this product to friends, investors and the world at large.

Part of the aim for some founders, is to bring on people(employees, investors and advisors) who’ll buy into the vision and join them on the journey.

Since they have limited resources at their disposal, they have to let go of something precious, “Ownership”.

Oh! Yeah. That’s the playbook most founders use in making their big dreams a success and solving problems in our world.

In the tech ecosystem, these chunks or bit’s of ownership is called “Equity”.

I guess that at this point, you’d love to know what this buzzword really means.

So, basically, Startup equity is the amount of ownership shareholders have in a startup. It is the percentage of the startup’s stock sold to stakeholders (such as investors, advisors, and employees). This gives them the right to share in the profit or loss of the startup.

One thing you need to note is that, this equity is not material or concrete in the early days, but rather it becomes concrete and grows in value as the startup grow or exit.

There a lot of benefits attached to startup equity asides the fact that you have a stake in the startup. As an equity holder in a tech startup,  you may have the right to vote during annual general meetings and contribute to the decision making process, dividends, special discounts on the product/service, etc.

Startup equity can also be held by a diverse set of people, and I'll’ll do my best to explain in a concise manner who is entitled to own startup equity, why and how much of equity each stakeholder can earn in the next episode.

For now, i’d love you to drop your comments, thoughts and questions in the section below.

See you on the next episode 🙈.