Q
What is equity?
A
Equity can mean different things in different contexts. Within the startup context, equity represents an ownership interest in a given startup company. For a simple example, if Company ABC has 100 shares of stock and you own 10 shares of stock in Company ABC, you effectively own 10% of Company ABC (10 shares that you own divided by 100 shares of stock in the company).
The purpose of equity is to align incentives between various stakeholders within the company. Typically with startup companies, founders, employees, and investors all own various forms of equity in the company (typically the rights will vary between investors and non-investors).
Next Question:What is preferred equity or preferred stock?
