What’s the Difference Between RSAs and RSUs in Startup Equity?

Restricted Stock Awards (RSAs) and Restricted Stock Units (RSUs) are very different, so don’t be fooled by their deceptively similar names. RSAs are an issuance of a certain number of shares of the startup’s common stock. These shares are typically subject to vesting, meaning that they cannot be sold or transferred until certain conditions are…

Startup Advisor Equity: Everything You Need To Know

Equity represents an ownership interest in a company. When an advisor receives equity in a startup, they become a part-owner of the company. This means that they have a stake in the success of the company and will benefit financially if it performs well. The prospect of equity motivates advisors to work hard and provide…

Vesting Schedule: What It Means for Startup Founders

Vesting schedules are a critical tool for startups that want to attract and retain talented employees, while ensuring that everyone is working toward the same goals. The concept is simple. Instead of earning equity all at once, the founder or employee earns it over a set schedule. Vesting acts as both a reward and a…

Preferred Stock vs Common Stock: What Startup Founders Should Know

While both common and preferred shares provide an ownership stake in a company, there are significant differences between them. It is important to consider these differences when deciding what type of equity structure to implement in a startup.  Founders should carefully evaluate their options and work with legal counsel to understand how each type of…

Startup Employee Equity: What Every Founder Needs To Know

Equity is an important part of compensation for early employees in startups. It gives them ownership and aligns them with company goals, which motivates them to work harder and stay longer. In addition, it allows early employees to share in the company’s success.  Once the founders have received their equity, it’s time to hire the…

What’s the Difference Between Promising Equity and Issuing Equity in a Startup?

There is a significant difference between promising equity and issuing equity to a startup employee. This article will explain the distinction and why it is important to both the company and employee. Promising equity means committing to provide equity in the future. Issuing equity means actually transferring ownership of equity to the employee. The promise…

Why Is It Important to Use Exact Share Numbers Not Percentages for Equity Offers?

Using percentages instead of exact share numbers is a risky move for both the company and the employee. It can cause confusion about the true value of the equity being offered and set false expectations. In the worst-case scenario, it could potentially cost the employee hundreds of thousands of dollars. Of course every situation is…

409A Valuations: What Founders Should Know

A 409A valuation is a method of valuation used by startups to determine the fair market value of their common stock. This valuation gets its name from the section of the Internal Revenue Code that governs it, and it is used to set the fair market value for stock grants and determine the strike price…

Startup Stocks: What They Are and How They Work

How many shares does a startup have? On the face of it, it seems fairly simple to count shares in a startup. But as with many things, once you dig deeper, you realize that the question really hinges on what definition you are using. This article should help founders understand and calculate shares based on…

Equity Dilution: How It Works In Startups

If you have been in the startup world for a while, you may have heard about dilution and have a vague idea that it is a bad thing. This article aims to help founders and employees understand the concept and how it affects them. Dilution refers to the reduction of the percentage ownership of the…

10 Rookie Startup Legal Mistakes

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