equity, founder, exitMore than a handful of entrepreneurs have avoided selling their equity before reaching a liquidity event such as an IPO or acquisition. How do owners preserve equity?
Note: by equity, I mean the value of it, not the percent kept.
Following on from the comment above (preserving the value of your equity), I’ll explain my situation and how we dealt with this.
My business partner and I are 50/50 shareholders (actual total shares issued = 300) in a UK Limited Company and after a few years we wanted to reward our longer serving employees with a profit share through dividends. This was 6 years ago and now we have 4 employees (half of our current employees) owning shares in the company. The total shares issued is now approx 350, so we have a smaller proportion of the dividend pot, but the dividend pot is larger and we are encouraging staff loyalty and longevity through this means.
A small item of clarity, which someone will pick up on, We have two classes of shares, Class A (voting) shares owned by my business partner and I, and class B (non voting) shares owned by our employees. So we keep control of the company and avoid a minority shareholder potentially having the “casting” vote, if they were to own voting shares.
The best way to preserve equity is simply to not sell it, Captain Obvious here..forgot to introduce myself - nice to meet you :)
But in all seriousness, to keep equity startups usually bootstrap by reinvesting the profits they make. However, in most cases the startup give up some equity for external investment, which means they have less equity than before, but still have a significant amount.
If this is not what you are looking for, then I apologize and then I’m probably not exactly sure what you are asking?
All content is licensed under CC BY-SA 3.0.