Equity in a sentence as a noun

Don't build someone's fart app for 5% equity.

Take that, less the $50,000 he's making, and his sweat equity is $135,000 per year.

We > can't compete with being a founder on equity.

If you take the Kima offer, you will wind up doing an equity round.

They sold them off and turned the equity into a down payment on a new house in new suburbs.

Not for more equity in a company whose executives are okay with this kind of ****, not to keep a job.

Because I did not want to own a tiny amount of equity in a poorly-run business.

I always advise startups to err on the side of generosity with equity.

"I have never seen a startup regret being generous with equity for their early employees.

The safe enables founders to raise early-stage funds without having to do a premature equity round.

Those guys have families and their negligible equity certainly doesn't justify 80-hour weeks.

The convertible note meets this need by combining the attributes of debt and equity instruments.

The equity upside motivated the investment and the debt came to be seen as added insurance just in case the venture did not pan out as hoped.

If Oculus had been able to give away just 10% equity, every single Kickstarter backer would be $20,000 richer today.

Incubators typically inject more money for far less equity!

With its "forced conversion" element, it not only combined the elements of debt and equity but did so with equity being the main focus of the investor.

Thus, you will have the tax complications that attend an equity funding, including needing to price your stock and option grants based on the $1 million company valuation and the need to do 409A valuations.

If IPOs come back strong some day, then you may be giving up too much at such a cost because they are the great leveler when it comes to weighing the value of options against other forms of equity holdings.

PG has assessed the broad economic proposition to which I would add the following: YC does take an immediate equity grant but does so with common stock and on terms that don't affect founder stock pricing.

In effect, the safe does leave founders saying to early investors, "Give us your money and but wait on getting your equity: if it goes well, you get equity; if it does not, you get nothing and you have almost no rights.

But where is the liability when no equity is being sold and instead you have commitments that backers will receive only little perks associated with a completed development effort?

For every story about someone making millions out of their equity when the startup they're working for exits there are thousands of stories of people who walked away with nothing but a few years having fun solving challenging problems.

In such cases, with institutional investors, you may still find yourself arguing about valuation in negotiating caps but the process is nowhere near as involved as it is with a typical equity round and founders with leverage can usually dispense with caps as well.

But by the far the biggest differential that I see comes with the value-add piece: with YC, founders pay a price in terms of equity they give up but they get huge benefits from becoming part of a network that keys them in to relationships and solutions that can prove invaluable to an early-stage startup.

Much of the "distraction" that founders face in raising money exists precisely because a typical equity round can be a complex process and, apart from needing to sell the economic proposition behind their venture, founders must also make sure that any funds they do take in are taken on reasonable terms.

Moreover, the strings that appear in Kima's term sheet are not trivial: the valuation is based on no larger than a 5% equity pool; you give up a board seat; you give Kima a broad veto power on many of your future actions relating to fundraising and other important company matters; you agree to restrictions on how the value is shared in case you are acquired.

If this is true where a venture sells equity interests that are true securities subject to the protections of securities laws, it is doubly true where the only thing being offered is a small perk tied to a development effort that is not guaranteed to be brought to completion or at least that is not guaranteed to be brought to completion within any specified time period.

If, however, the company can do a qualified funding before the note matures, the debt converts into preferred-stock equity on the terms struck with the equity investors at first funding, usually with a price discount, sometimes with a price cap, and typically with merger-premium protection for the converting noteholders for the added risk they take in being early in the game when risks are at their highest.

I can finally let go of my plan to abandon my family, move to the bay area, drain my life savings, live in a shoebox, stumble from one conference and event to the next hoping to network and find my messiah & co-founder, try to get funded, grow my business to someone else's expectations, all for a tiny fraction of a chance to succeed and be either a slave to my own company or lose control of my baby and walk away with diluted equity.

It also means you create tax risks and complications: if the equity round is too near the time of formation, the $.0001/sh pricing used by founders for their shares may look funny next to the much higher amount per share paid by investors, raising risks that the founders can be deemed to have received their shares at the higher valuation as potentially taxable service income; once you do an equity round, you will need to do 409A valuations in connection with doing option grants and that necessitates getting outside independent appraisals; equity rounds come with strings, including investor preferences, investor protective provisions limiting what you can do as a founder without investor approval, co-sale and first refusal rights favoring investors and concomitantly limiting founders, board seats and/or observer rights for investors, and the like.

In that case, the debt vanishes and the noteholder becomes an equity holder and everybody wins in terms of optimal positioning of their respective stakes in the venture: founders have gotten their cheap stock that they can hold until a liquidity event, at which time they can sell typically for long-term capital gains and with no intervening taxes to pay; noteholders have gotten their equity stakes with all protections and with no-less-favorable pricing than that offered to the preferred stock investors who presumably have negotiated a good, arms-length deal for themselves; the company avoids a too-early high repricing of its stock so it can continue to offer good incentives to new team members as they join; and the company does not usually have to fool with 409A valuations or with other strings and formalities attending the bringing in of investors via equity rounds.

Equity definitions


the difference between the market value of a property and the claims held against it


the ownership interest of shareholders in a corporation


conformity with rules or standards; "the judge recognized the fairness of my claim"

See also: fairness