Business Case Studies & Business Publications

Ownership, Control, and the Role of Equi...

Sarasvathy, Saras ...

Technical Note

Ownership, Control, and the Role of Equity in New Ventures

Sarasvathy, Saras D.

ENT-0226 | Published September 2, 2020 | 8 pages Technical Note

Collection: Darden School of Business

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This technical note discusses how a high-potential start-up entrepreneur should use equity in building and growing a new venture. One of the most crucial things for entrepreneurs to understand is equity: Most high-growth ventures grow through equity partnerships, but most new ventures fail because relationships between founding partners and other equity partners become conflicted and impossible to repair. You need to share equity to build an enduring high-growth venture. But sharing equity without understanding how increases the probability for the venture breaking up and failing. The note addresses multiple topics regarding equity, including compensation, profit sharing, decision rights, and cap tables.