2. Equity Distribution and Financing Rounds

Equity distribution refers to how ownership of a company is divided among its founders, investors, and employees. When a startup seeks funding, it often goes through financing rounds, such as seed, Series A, or Series B, where it raises money to grow. In exchange for their investment, new investors receive equity, which means they own a percentage of the company. As more rounds occur, earlier investors may see their ownership percentage decrease, but the overall value of the company can increase, benefiting all parties if the business succeeds.