Equity Terminology & Definitions
For first time founders, knowing the proper terminology around “Equity” can be intimidating. So to help we put together this handy guide of basic definitions below:
The maximum number of shares that your company is authorized to issue. Usually defined at the time of company creation and can be found at certificate of incorporation. For more information visit here.
The total number of shares that have been distributed by the company to stakeholders: founders, employees, investors. Sometimes also called Outstanding Shares For more information visit here.
It is simply a difference of Authorized Shares minus Issued Shares.
Means that you will not get any shares vested until curtain date usually the first anniversary of your start date. For more information visit here.
The technique used to allow founders or employees to earn their equity over time. The normal time period of vesting for employees is usually 4 years. For Founders it is usually 3 years. For more information visit here.
A vesting schedule dictates when you may exercise your stock options or when the forfeiture restrictions lapse on restricted stock. For more information visit here.
Capitalization table shows percentages of ownership in your company by different stakeholders founder, employees, investors.