Managing Startup Equity

The article discusses the concept of startup equity, which refers to the ownership of a company expressed as a percentage of shares. Founders initially own 100% of the company, but as they seek funding and attract employees, they exchange equity. Investors take on risk by providing funding and receive returns proportional to their equity stake if the startup succeeds. The article emphasizes the importance of equitable distribution of equity among founders based on their roles and contributions. It suggests that a 50/50 split may not always be suitable, and equity should be allocated based on value creation. The article also highlights the need for open and early discussions about ownership to avoid conflicts and unhappy founding team members. Additionally, it mentions the use of equity compensation to recruit key employees and the implementation of vesting schedules to incentivize employee retention. Ultimately, the article stresses the finite nature of equity and the significance of careful allocation.

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Managing Startup Equity By Stuart Tweedie