Equity Round
Selling Ownership for Capital
Definition
An equity round is a funding event where a company sells shares of stock to investors at a negotiated valuation. Unlike convertible instruments, equity rounds immediately establish ownership percentages.
In Simple Terms
An equity round is a straightforward sale of shares. "We're worth $10M, we're selling 20%, so give us $2M for 1/5 of the company." Everyone knows exactly what they own immediately.
Why It Matters
Equity rounds are the "real" funding rounds—Series A, B, C, etc. They set a formal valuation, establish ownership, and create a liquid market for shares. These rounds typically come after SAFE/convertible note raises and require more formal legal processes.
Example
Company raises Series A: $5M pre-money valuation, selling $2M in equity. Investors own 28.6% ($2M / $7M post-money), founders own 71.4%. Price per share is set, and ownership is clear.