Two questions- how do you determine what the actually equity of a small business is? What is the equity based on, the amount of money the business has in its bank account? How do you pay investors based on it? Shares- Can an LLC distribute shares? If not, how do you measure equity. In percentage points?
As far as I can tell, yes you measure shares in percentages, I'm guessing the valuation (equity) of a business depends on all of it's assets minus it's debt similar to if you wanted to calculate your net worth. As for how you pay investors based on it, they basically own shares in the company that can be sold at a later date. I'm not entirely sure of this but that's what I got from this video.
Please Lord Jesus bless this channel, allowing it to reach over One Millions subscribed in less than 2 years. Allows this man works to be fruitful, in Jesus name, amen. That is the only thing I could think of after being served by your God's gift. Keep it up brother.
Thank you for this informative video. One query - what if there is no vesting clause in Equity Agreement or SHA, in that case will 100% shares be considered vested immediately after agreement?
Something I've never understood (and am currently seeking an answer for)... while our founders and employees shares are vesting, where do they sit? Who owns/holds them during this time? I assume they are issued and held somewhere while vesting, and that companies aren't just issuing more shares each month? Any help legends?!?
I think after 4 years you'd probably have a much higher salary than at the beginning, but I would think that many companies would offer hires like this refreshers so they continue vesting equity.
hey, you made mention of founders owning about 50% of the equity. in the case where there are maybe 2 or 3 cofounders who started the company, how do you give the shares because now you cant allocate 50% to each founder
Same way, but you get paid each year on the profits the owners choose to pay out in dividends. So if you make 2M profit and the board chooses to reinvest half and pay half in dividends then the owners would share 1M in the proportion (%) that they own of the business.
Yes, usually everyone goes through dilution and your calculation is pretty close. You own a smaller % of a larger pie. The value of your shares is usually a lot higher. Think of it like owning 5% of a 10 million dollar company vs Owning 4.5% of a 50 million dollar business.
I was offered a buyout for an online company I own, cash + ($20,000 equity of their $2.5M valuation). For the life of me I can’t understand what happens if I pull the trigger on accepting that offer. Does it sit and accumulate value over time if they do well? Can I eventually cash out? Do I receive payments quarterly? Any help would be appreciated.
You get a share of their company but it depends on how well the company does. Also is it currently overvalued/undervalued? It's good to get some cash and some shares to hedge your bet in case the company goes down.
Hey, kindly guide me. I'm starting a company based on retail. Idea was mine, I'll be CEO snd "brain" of the company. But i don't have money to invest. I've hired a guy as COO , he'll invest $13,250 in my company along with his efforts. I won't give him salary even i won't take salary either. So, my business partner is partially investing and I found an investor, he's willing to invest $30k . My startup is in "pre -seed stage" right now! Now, kindly guide me, how much %ge of shares I should give to my COO who's also my co-founder and investor. But I'm "main" in this company, without me it won't run and I want majority shares as CEO and main founder
Plus, there would be 50% profit sharing between me and my business partner (COO) . I'm confused how much %ge share, I give to my business partner as well as investor for the amount of money they're investing in pre -seed stage
Two questions- how do you determine what the actually equity of a small business is? What is the equity based on, the amount of money the business has in its bank account? How do you pay investors based on it? Shares- Can an LLC distribute shares? If not, how do you measure equity. In percentage points?
As far as I can tell, yes you measure shares in percentages, I'm guessing the valuation (equity) of a business depends on all of it's assets minus it's debt similar to if you wanted to calculate your net worth. As for how you pay investors based on it, they basically own shares in the company that can be sold at a later date. I'm not entirely sure of this but that's what I got from this video.
@@karma1507 Ah, thanks
Thank you, this is really great and super helpful.
Please Lord Jesus bless this channel, allowing it to reach over One Millions subscribed in less than 2 years.
Allows this man works to be fruitful, in Jesus name, amen.
That is the only thing I could think of after being served by your God's gift. Keep it up brother.
Amen brother! Thanks for reminding me why I do what I do.
Thank you for the book recommendation.
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Nice explanation 😊
Good video. Keep it coming
Very well presented . I have no question !
Thanks you .
😅
Thanks a for the breakdown, you guys are really helpful 😎
Thanks we really appreciate your feedback
Very helpful!
So helpful
Thank you for this informative video. One query - what if there is no vesting clause in Equity Agreement or SHA, in that case will 100% shares be considered vested immediately after agreement?
Something I've never understood (and am currently seeking an answer for)... while our founders and employees shares are vesting, where do they sit? Who owns/holds them during this time? I assume they are issued and held somewhere while vesting, and that companies aren't just issuing more shares each month? Any help legends?!?
They sit with the entity that has the right to hold on to them if they fulfill the obligations
Very clear
Thank you for this sir
So what is the motivation for an employee to remain after fully vested other than to remain and contribute?
I think after 4 years you'd probably have a much higher salary than at the beginning, but I would think that many companies would offer hires like this refreshers so they continue vesting equity.
Time to negotiate more shares or salary or change companies if you ask me. It really depends if/how much you like your job.
Also, it depends on terms. You may've agreed to the company to buy back the shares if you leave immediately after your vest.
hey, you made mention of founders owning about 50% of the equity. in the case where there are maybe 2 or 3 cofounders who started the company, how do you give the shares because now you cant allocate 50% to each founder
They would give up their shares equally to keep their splits the same.
very nice video sir
Does startup equity only work if you plan to sell it eventually? How does it work if you have equity in a company that never sells?
Same way, but you get paid each year on the profits the owners choose to pay out in dividends. So if you make 2M profit and the board chooses to reinvest half and pay half in dividends then the owners would share 1M in the proportion (%) that they own of the business.
What about Founder CEO salary?
Ramen till you raise over 1M 😅
What happens to employ 5% when we go to seed round and sell 10% of the company? Do they still have 5% or their equity gets reduced to 4.5%?
Yes, usually everyone goes through dilution and your calculation is pretty close. You own a smaller % of a larger pie. The value of your shares is usually a lot higher. Think of it like owning 5% of a 10 million dollar company vs Owning 4.5% of a 50 million dollar business.
Wow, thank you
You are welcome! Hope it was helpful.
How does this translate to a nonprofit?
I was offered a buyout for an online company I own, cash + ($20,000 equity of their $2.5M valuation). For the life of me I can’t understand what happens if I pull the trigger on accepting that offer. Does it sit and accumulate value over time if they do well? Can I eventually cash out? Do I receive payments quarterly? Any help would be appreciated.
You get a share of their company but it depends on how well the company does. Also is it currently overvalued/undervalued? It's good to get some cash and some shares to hedge your bet in case the company goes down.
Hey, kindly guide me. I'm starting a company based on retail. Idea was mine, I'll be CEO snd "brain" of the company. But i don't have money to invest. I've hired a guy as COO , he'll invest $13,250 in my company along with his efforts. I won't give him salary even i won't take salary either. So, my business partner is partially investing and I found an investor, he's willing to invest $30k . My startup is in "pre -seed stage" right now! Now, kindly guide me, how much %ge of shares I should give to my COO who's also my co-founder and investor. But I'm "main" in this company, without me it won't run and I want majority shares as CEO and main founder
Plus, there would be 50% profit sharing between me and my business partner (COO) . I'm confused how much %ge share, I give to my business partner as well as investor for the amount of money they're investing in pre -seed stage
Your partner dwarves 30% if they are willing to stay with you from the start
😊😊😊😊
so you ask someone to do all the work, then take most of the profit. This system is broken.
You seem like one 9-4 desk jobber frustrated of your job.
Notorious investor…?
mediocre advice