Equity Glossary

Browse 24 equity terms defined in plain English, from the cultural dictionary of computing.

24 Equity Terms

Advisory Shares
Equity granted to advisors in exchange for strategic help, introductions, expertise, or credibility rather than full-time operating work. These grants are...
Anti-Dilution
A protective term that adjusts an investor's ownership economics if later shares are sold at a lower valuation, reducing the impact of dilution from a down...
Cap Table
Cap Table, short for capitalization table, is a detailed record of all equity ownership in a company, showing who owns what percentage, what type of securities...
Cap Table
A capitalization table — a spreadsheet or tool tracking who owns what percentage of a company, including founders, investors, employees (options/RSUs), and...
Cliff
The initial period (typically one year) in a vesting schedule during which no equity vests. After the cliff, a large chunk (usually 25%) vests at once, with...
Cliff
The initial period (typically one year) of a vesting schedule during which no equity vests. If you leave before the cliff, you get nothing. The startup's...
Cliff Vesting
A vesting structure where no equity vests until an initial threshold date, after which a block vests at once and the rest continues on the normal schedule....
Dilution
The reduction in existing shareholders' ownership percentage when new shares are issued in a funding round. Each round typically dilutes founders by 15-25%....
Double Trigger
An acceleration provision where employee equity vests early only if two conditions occur, typically a change of control plus termination without cause or a...
Employee Option Pool
A reserved set of company shares or options intended for current and future employees, usually to support hiring and retention. Option-pool size is a major...
Employee Stock Option
A right granted to an employee to buy company shares at a fixed strike price, usually subject to vesting over time. Employee stock options are a standard part...
Equity Dilution
The reduction in an existing shareholder's ownership percentage when new shares are issued. Dilution is normal in startup financing, but its impact depends on...
Equity Financing
Raising capital by selling ownership in the company rather than borrowing money. Equity financing is the default model for venture-backed startups because...
Equity Vesting
The schedule by which ownership rights are earned over time rather than granted all at once. Vesting aligns incentives by making continued contribution a...
ESOP
Usually shorthand for an employee stock option plan, the structure used to grant and manage equity incentives for employees. In some jurisdictions the acronym...
Founder Vesting
A vesting arrangement applied to founders' equity so ownership is earned over time rather than fully guaranteed from day one. It protects the company if a...
Option Pool
The reserved set of shares or options available for employee and advisor grants. Option-pool sizing is a recurring negotiation point because expanding it...
Preferred Stock
A class of shares that gives investors special rights relative to common stock, such as liquidation preference, anti-dilution protections, or other...
Pre-Money Valuation
The value of a company immediately before new investment capital is added in a financing round. It is the starting point for calculating post-money valuation...
Stock Option
A right to purchase company shares at a predetermined price, usually granted as part of compensation and subject to vesting. In startups, stock options are a...
Stock Vesting
The process by which ownership rights in stock or options are earned over time rather than all at once. Vesting schedules align contribution with ownership and...
Sweat Equity
Ownership earned through labor, expertise, or effort rather than cash investment. In startups, sweat equity often describes what founders and early...
Vesting
The process by which an employee earns ownership of employer-contributed stock or options over time. Standard startup vesting is a 4-year schedule with a...
Vesting Schedule
The timeline and structure that determine when equity or options become earned over time. Vesting schedules typically include a cliff and ongoing periodic...

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