Equity represents ownership in a company, typically in the form of shares of stock. Equity holders are entitled to a proportional share of the company's value and, depending on the type of equity, may have voting rights and dividend entitlements.

Types of Startup Equity

• Common Stock: Typically held by founders and employees; has voting rights but lower priority in liquidation
• Preferred Stock: Held by investors; includes special rights like liquidation preferences and anti-dilution protection
• Stock Options: The right to purchase shares at a predetermined price (strike price)
• Restricted Stock Units (RSUs): Shares granted subject to vesting conditions

Equity Distribution

In a typical startup, equity is distributed among founders (50-70% initially), investors (20-40% over multiple rounds), and employees via an option pool (10-20%).