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Equity agreements allow entrepreneurs to secure funding for their start-up by giving up a portion of ownership of their company to investors. In short, these arrangements typically involve investors providing capital in exchange for shares of stock which they will hold and potentially sell in the future for a profit.
A standby equity purchase agreement is a contract between a company and investor that allows the latter to purchase shares of company stock at a set price. The standby equity purchase agreement is typically used when a company is planning to go public or is seeking to raise additional funds through a private placement.
Essentially, startup equity describes ownership of a company, typically expressed as a percentage of shares of stock. On day one, founders own 100%. If you have more than one founder, you can choose how you want to share ownership: 50/50, 60/40, 40/40/20 ,etc.
An equity financing agreement is a contract between a company and an investor that outlines the terms of the investment. The agreement includes the amount of money being invested, the percentage of ownership the investor will receive, and the rights and obligations of both parties.
When your startup is in the initial stages, the founder or the co-founders usually own it entirely, typically in a 50/50 split, or 60/40, depending on various conditions. As you grow, equity is distributed among those who contributed to fund your startup, give you advise, or develop your product/service offerings.