Does owning x% equity in a company mean you will get x% of the profits yearly?


If I join a startup that is offering me 10% equity and they become profitable, does that mean I will get 10% of the profits they make each year? At what point in a startup's life does it start paying out to share holders?

Equity Profit Sharing Startups

asked Feb 21 '14 at 15:57
Duane Clark
50 points
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2 Answers


Most startups don't start distributing profits right away. They put all profits back in the business to accelerate growth.

It's even more so the case if you have taken angel or venture capital. Investors aren't interested in taking small profits that their portfolio startup would generate. They want you to keep reinvesting all profits and expanding until you either get acquired or file for an IPO.

That's the real payday, not small yearly profits.

answered Feb 21 '14 at 16:31
Bryan Gil
160 points


Let's say I want to start a business.

I take $10,000 of my own money, and invest it in the company. The company is now worth $10,000, with me having 100% entity. The company makes $1000 that year, and I take all of it.

You come along and I sell 10% of my share in the company to you for $1,000. That year, the company makes $1000 again. That money would be split between you and me, $900 to $100.

answered Feb 21 '14 at 16:07
Daniel Stern
13 points

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Equity Profit Sharing Startups