Equity vs. Profit-Sharing

The Trap

Treating percentage ownership as if it were a direct claim on current value, for example: "I own 50% of a company worth $1M, so I'll get $500k."

The Reframe

At the startup phase, company valuation is near zero, so a percentage of near-zero is still near-zero. Equity percentage is a claim on future value, not a payout on current value.

Why It Matters

Conversations about equity split are meaningless until this distinction is explicit. Settle it first, then move on to how to divide things fairly.

Where to Go Next

This sets the frame: don't over-index on percentage early. The contribution table and the opportunity-cost lens give you the inputs for a fair split. Vesting protects both sides as those inputs change over time.