article thumbnail

Mathematical vs. Economic Dilution of Startup Equity: Thinner Slices of an Extra-Large Pizza

Gust

Let’s get right down to business: Dilution of founders’ and other early shareholders’ equity in startups is frequently a subject of intense interest and debate. Yet what matters fundamentally is economic dilution : Will adding newly issued shares make existing shares less valuable, and if so, by how much?

Dilution 162
article thumbnail

Convertible Note Seed Financings: Founders Beware!

Scott Edward Walker

This part will address certain tricky issues. What Happens If a Startup is Acquired Prior to the Note’s Conversion to Shares of Preferred Stock? The first approach is the most founder-friendly, and it is a provision that merely requires the startup to pay-off the loan, plus interest.

Finance 64
article thumbnail

What Kind Of Company Should You Create?

YoungUpstarts

Additionally, it will be important to consider whether you plan on attracting investment capital through the distribution of stock, because only certain types of businesses can issue shares of ownership. S-Corporation. The S-corporation is a popular choice for solo business owners. Limited Liability Company (LLC).

LLC 182