🗓️ Jaclyn Johnson POSTED TO THE GROUP CHAT May 14, 2026

Venture & Fundraising | Money, Power, & Culture

I want to tell you about two founders.

One sold her company for $350 million. One sold hers for $22 million. They walked away with the same amount of money.

I was the $22 million founder. Here's why that happened, and what it taught me about the thing nobody talks about enough in founder circles: equity.

Equity Is Ownership. But It's More Complicated Than That.

At its most basic, equity is ownership in your company. When you start a business, you own 100% of it. Simple.

But the moment you bring in outside capital, co-founders, or employees with stock — that number starts to change. And if you're not paying attention, it can change in ways that cost you everything.

Here are the four equity concepts every founder needs to understand before they sign anything.

1. Founder Equity (and Dilution)

When you start your company, you own it outright. Every time you raise a round of funding, you give away a percentage of that ownership in exchange for capital. This is called dilution.

It compounds. Seed round, Series A, Series B — each time, your slice of the pie gets smaller. That's not inherently bad. A smaller piece of a much bigger pie can still be life-changing money. But founders often underestimate how much they're giving away over time, and by the time they're at the exit, the math doesn't look the way they expected.

2. Liquidation Preferences

This is the clause that changes everything — and most founders don't fully understand it until it's too late.

A liquidation preference gives investors the right to get paid back before you do when the company is sold. In practice, this means if your company sells for $250 million but you have $100 million in liquidation preferences sitting on top of that deal, investors get their money back first. What's left is what everyone else splits.

This is exactly what happened to the founder I mentioned. She built something extraordinary. She raised round after round. And by the time her $250 million exit was carved up, the liquidation preferences stacked on top of each other meant her actual take-home looked a lot more like mine.

I never raised outside capital. I owned my company outright. So when I sold for $22 million, that number went directly to me.

The lesson: the number on the press release and the number in your bank account are not the same thing.

3. Vesting Cliffs

If you have co-founders or employees with equity, they don't own all of it on day one. It vests over time — meaning they earn it gradually, usually over four years.

Most equity agreements include a one-year cliff. That means an employee has to stay at the company for a full year before they earn a single share. If they leave at month eleven, they walk away with nothing.

This protects you as a founder. But here's what people forget: you need to understand your own vesting schedule too. If you're acquired and you have unvested equity, what happens to it? Does it accelerate? Does it disappear? These are questions you need to know the answers to before you're in a negotiation.

4. Phantom Equity

This one is sneaky.

Phantom equity gives someone the financial benefit of owning stock — without actually owning stock. They get a payout if the company sells, but they have no real ownership, no voting rights, and no seat at the table. It's a promise, not a stake.

Companies use phantom equity to incentivize employees or advisors without actually diluting the cap table. It can be a useful tool. But if you're on the receiving end, you need to know what you have — and what you don't.

Equity on paper isn't always equity in practice.

The Bottom Line

Before you raise your next round, before you sign your next term sheet, before you give away another percentage point of your company — understand what you're actually giving away.

Equity is the most valuable thing you have as a founder. Protect it like it is.

The two most important questions you can ask yourself right now:

What percentage of my company do I actually own today?

If my company sold tomorrow, what would I actually walk away with?

If you don't know the answers, find out. Because by the time you need to know, it's usually too late to change anything.

What Every Founder Needs to Know About Equity (Before It's Too Late)