{"id":1257,"date":"2026-09-05T12:10:16","date_gmt":"2026-09-05T12:10:16","guid":{"rendered":"https:\/\/www.lawctopuslawschool.com\/blog\/?p=1257"},"modified":"2026-09-05T12:10:19","modified_gmt":"2026-09-05T12:10:19","slug":"equity-is-more-than-just-a-buzzword-whats-behind-that","status":"publish","type":"post","link":"https:\/\/www.lawctopuslawschool.com\/blog\/equity-is-more-than-just-a-buzzword-whats-behind-that\/","title":{"rendered":"Equity is more than just a Buzzword: What\u2019s behind that 10%?"},"content":{"rendered":"\n

This blog\/article is written<\/em> by Soumya Chaturvedi, Learning Manager, Lawctopus Law School<\/em><\/p>\n\n\n\n

“I’ll give you 10% equity for 50 lakh.” The founder says it as if it were a minor request- a rounding error, a favour. The Shark doesn’t even flinch. She\u2019s done the maths already. 10% today. But what does that 10% buy her? What happens to it 3 funding rounds down the road? That\u2019s the part the founder hasn\u2019t figured out. It\u2019s the part most of us skip over every time we hear the word \u201cequity\u201d- in a pitch, in a job offer, in a WhatsApp forward about some friend\u2019s startup. But what does equity mean once the term sheet is signed and the cameras are gone? It means you have a claim to something that may be worth a fortune or nothing. Equity is not a payout. It’s a bet, and all bets have fine print.<\/em><\/p>\n\n\n\n

Equity is a Slice, not a Cheque<\/strong><\/h2>\n\n\n\n

Here\u2019s what the Sharks know that most founders walk in not knowing: equity is not money changing hands, it is control and ownership changing hands. <\/p>\n\n\n\n

When a Shark asks for 15% she is not asking for 15% of your bank balance – she is asking for 15% of your company’s equity share capital which is a specific legal category under Section 43 of the Companies Act, 2013.1<\/a><\/sup> That gives you a say in how the company is run, a share of any dividend the board decides to pay and a claim on whatever’s left if the company goes under.<\/p>\n\n\n\n

What it doesn’t come with is a guarantee of cash in your bank accounts today. No one\u2019s writing a cheque the minute a deal closes on TV. The Shark isn’t buying a payout, she is buying a place in a queue and the length of that queue, and who is ahead of her in it, decides whether her 15% is worth crores or nothing.<\/p>\n\n\n\n

More Money, Smaller Slices<\/strong><\/h2>\n\n\n\n

Let’s take\u00a0the pitch given by the startup Skippi Ice Pops (\u201cSkippi deal\u201d)<\/strong> for Shark Tank. The founders asked the Sharks\u00a0for \u20b945 lakh in exchange for 5% equity. The final negotiated deal turned out to be\u00a0\u20b91 crore for 15% equity. This meant more money for the founders, but also a larger stake in the company for the investors.2<\/a><\/sup><\/p>\n\n\n\n

Now a few years down the lane, let’s assume\u00a0Skippi Ice Pops raises further funds. A new investor wants 10% of the company. If new\u00a0shares are issued for that investment, the original shareholders’ stake\u00a0may decrease.3<\/a><\/sup><\/p>\n\n\n\n

The Sharks may still own the same number of shares, but they now represent a smaller percentage of the company as the total number of shares has increased.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Image 1: Company grows, your ownership shrinks<\/em><\/p>\n\n\n\n

This process is known as dilution<\/strong>. It does not necessarily imply that the original investment has become worthless. If the company grows, a smaller share of a much larger corporation may still be valuable. <\/p>\n\n\n\n

However, the percentage displayed on a pitch deck is not permanent. So when someone says, “I own 15% of a startup,” ask as of what date. <\/p>\n\n\n\n

But timing is only half the problem. Even if you knew the exact date, the exact number of shares, and the exact percentage, you still wouldn’t know what that percentage actually lets someone do<\/em>. That’s because not all equity is created equal.<\/p>\n\n\n\n

Does Equity Mean Equal Rights?<\/strong><\/h2>\n\n\n\n

Let’s return to the Skippi deal for a bit. The Sharks bargained their way from 5% to 15%. However, “15%” does not specify if that share included any rights such as a vote on all board decisions, a priority payout if the company was sold tomorrow, or neither.<\/p>\n\n\n\n

“Equity”<\/strong> does not refer to a single, universal right. Under Section 43 of the Companies Act of 2013,<\/em> equity share capital may have ordinary voting rights or differentiated voting, dividend, or other rights. This means that two people may each own equity shares but may not necessarily have the same rights. <\/p>\n\n\n\n

For example, one class of shares may have one vote per share, whereas another may have enhanced or limited voting rights. The percentage alone does not reveal who may oppose a significant decision, select a director, or shape the company’s future. The rights tied to the shares are just as important.4<\/a><\/sup><\/p>\n\n\n\n

Preference shares<\/strong> function differently. In a scenario such as a sale or liquidation, a preference shareholder may be entitled to receive the agreed-upon amount before ordinary equity owners do. <\/p>\n\n\n\n

So, when an investor negotiates “10%,” they may be considering more than just ownership. They may also be negotiating repayment priorities, voting rights, and exit\u00a0protections.5<\/a><\/sup><\/p>\n\n\n\n

Then there’s sweat equity<\/strong>. This refers to shares offered to directors or workers in exchange for their contributions, intellectual property, or know-how, rather than simply for financial investment. <\/p>\n\n\n\n

In a company, equity can be received by a founder, purchased by an investor, or issued to an employee- but the legal and economic implications vary.6<\/a><\/sup><\/p>\n\n\n\n

None of this is decided by the word “equity”<\/em> itself, though. It’s decided by documentation and paperwork- and that paperwork is where the real negotiation happens.<\/p>\n\n\n\n

The Fine Print Which Runs the Show<\/strong><\/h2>\n\n\n\n

Let\u2019s say an investor takes a 10% stake. OK, but what happens when the company raises another round? If they have pro rata rights they can invest again to maintain that 10%. Pass on it, and their slice reduces as fresh shares go out.<\/p>\n\n\n\n

Another form of protection is an anti-dilution provision. Say an investor buys some shares at \u20b9100, and the company later issues shares to a new investor at \u20b950. An anti-dilution clause can alter the original investor\u2019s entitlement so that the reduction in price does not affect them severely.<\/p>\n\n\n\n

The term \u201cequity\u201d itself does not generate these rights. They are negotiated and granted through agreements such as Share Subscription Agreement and Shareholders\u2019 Agreement. <\/p>\n\n\n\n

This documentation may also include reserved matters (requiring the consent of investors to key actions) and exit rights (setting out how an investor may eventually sell or realise the value of their shares). The pitch can say \u201c10% equity.\u201d The documents detail what that 10% can really do.<\/p>\n\n\n\n

Read Beyond the Percentage<\/strong><\/h2>\n\n\n\n

Equity is not synonymous with money, control or guaranteed wealth. It\u2019s a bundle of rights tied to a particular class of shares, further shaped by dilution, investor protections and the documents governing the relationship. The next time a founder offers ownership, or an employer promises it, don\u2019t just look at the percentage. <\/p>\n\n\n\n

Probe deeper into what is the nature of the shares, the rights attached and what does the documentation actually say.<\/p>\n\n\n\n

Interested in understanding what happens behind the percentage in a startup deal?<\/strong> Learning how equity, term sheets, shareholder rights and investment documents work is an important part of building practical corporate law skills.<\/p>\n\n\n\n

Our counsellors can help you identify the right courses and learning path to build these skills and explore a career in corporate law.<\/p>\n\n\n\n

Call us at +91 93596 84056<\/strong> for a free counselling call or write to courses@lawctopus.com<\/a><\/strong> for personalised career guidance.<\/p>\n\n\n\n

References<\/strong><\/h2>\n\n\n
  1. Companies Act, 2013, No. 18 of 2013, Section 43(a), India Code,
    https:\/\/www.indiacode.nic.in\/bitstream\/123456789\/2114\/3\/a2013-18.pdf<\/a>. \u21a9\ufe0e<\/a><\/li>
  2. Rehmat Creatives, Skippi Ice Pops: Nostalgia and Nutrition Seal Shark Tank India\u2019s First All-Shark Deal<\/em>, Medium (May 4, 2025), https:\/\/medium.com\/@rehmatcreatives\/skippi-ice-pops-nostalgia-and-nutrition-seal-shark-tank-indias-first-all-shark-deal-15466ed79562<\/a>; Hyderabad-Based Skippi Ice Pops Gets Rs. 1 Crore from Shark Tank India<\/em>, Telangana Today<\/em> (Dec. 28, 2021), https:\/\/telanganatoday.com\/hyderabad-based-skippi-ice-pops-gets-rs-1-crore-from-shark-tank-india<\/a>. \u21a9\ufe0e<\/a><\/li>
  3. Companies Act, 2013, No. 18 of 2013, Section 62(1)(a)\u2013(c), India Code, https:\/\/www.indiacode.nic.in\/bitstream\/123456789\/2114\/3\/a2013-18.pdf<\/a>. Section 62 governs the further issue of share capital, including the issue of shares to existing shareholders, employees and other persons. \u21a9\ufe0e<\/a><\/li>
  4. Id. Section 43(a)(i)\u2013(ii). Section 43 provides that equity share capital may carry ordinary voting rights or differential rights relating to dividends, voting or otherwise. \u21a9\ufe0e<\/a><\/li>
  5. Id. Section 43(b). Section 43 separately recognises preference share capital. \u21a9\ufe0e<\/a><\/li>
  6. Id. Section 54(1). A company may issue sweat equity shares to directors or employees, subject to the statutory conditions prescribed under Section 54 and the applicable rules. \u21a9\ufe0e<\/a><\/li><\/ol>\n\n\n

    About the Author<\/strong><\/p>\n\n\n\n

    Ms. Soumya Chaturvedi is a Learning Manager at Lawctopus Law School and an ex-Associate at IndusLaw, where she worked in the Capital Markets team. A 2021 graduate of NLU Odisha, she has previously interned with leading law firms including LKS, DSK Legal, and L&L Partners.<\/em><\/p>\n\n\n\n

    <\/p>\n","protected":false},"excerpt":{"rendered":"

    This blog\/article is written by Soumya Chaturvedi, Learning Manager, Lawctopus Law School “I’ll give you 10% equity for 50 lakh.” The founder says it as if it were a minor request- a rounding error, a favour. The Shark doesn’t even flinch. She\u2019s done the maths already. 10% today. But what does that 10% buy her? What […]<\/p>\n","protected":false},"author":10,"featured_media":1260,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"footnotes":"[{\"content\":\"Companies Act, 2013, No. 18 of 2013, Section 43(a), India Code,
    https:\/\/www.indiacode.nic.in\/bitstream\/123456789\/2114\/3\/a2013-18.pdf<\/a>.\",\"id\":\"a52d11ce-bb16-4a19-accc-fb7a8ed2e854\"},{\"content\":\"Rehmat Creatives, Skippi Ice Pops: Nostalgia and Nutrition Seal Shark Tank India\u2019s First All-Shark Deal<\/em>, Medium (May 4, 2025), https:\/\/medium.com\/@rehmatcreatives\/skippi-ice-pops-nostalgia-and-nutrition-seal-shark-tank-indias-first-all-shark-deal-15466ed79562<\/a>; Hyderabad-Based Skippi Ice Pops Gets Rs. 1 Crore from Shark Tank India<\/em>, Telangana Today<\/em> (Dec. 28, 2021), https:\/\/telanganatoday.com\/hyderabad-based-skippi-ice-pops-gets-rs-1-crore-from-shark-tank-india<\/a>.\",\"id\":\"108b8dd2-d66e-4328-9952-415a6462e831\"},{\"content\":\"Companies Act, 2013, No. 18 of 2013, Section 62(1)(a)\u2013(c), India Code, https:\/\/www.indiacode.nic.in\/bitstream\/123456789\/2114\/3\/a2013-18.pdf<\/a>. Section 62 governs the further issue of share capital, including the issue of shares to existing shareholders, employees and other persons.\",\"id\":\"b1e4eee1-7dd5-4e70-a6c3-a1a49ee5c619\"},{\"content\":\"Id. Section 43(a)(i)\u2013(ii). Section 43 provides that equity share capital may carry ordinary voting rights or differential rights relating to dividends, voting or otherwise.\",\"id\":\"3e6fde87-d763-49ab-92e3-45888b1f6fd7\"},{\"content\":\"Id. Section 43(b). Section 43 separately recognises preference share capital.\",\"id\":\"db22a90f-88a4-47f8-9aae-c4dfb78c1969\"},{\"content\":\"Id. Section 54(1). A company may issue sweat equity shares to directors or employees, subject to the statutory conditions prescribed under Section 54 and the applicable rules.\",\"id\":\"36d3e54b-ab8f-474d-9880-df73400d0582\"}]"},"categories":[1],"tags":[],"class_list":["post-1257","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.lawctopuslawschool.com\/blog\/wp-json\/wp\/v2\/posts\/1257","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lawctopuslawschool.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lawctopuslawschool.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lawctopuslawschool.com\/blog\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lawctopuslawschool.com\/blog\/wp-json\/wp\/v2\/comments?post=1257"}],"version-history":[{"count":2,"href":"https:\/\/www.lawctopuslawschool.com\/blog\/wp-json\/wp\/v2\/posts\/1257\/revisions"}],"predecessor-version":[{"id":1259,"href":"https:\/\/www.lawctopuslawschool.com\/blog\/wp-json\/wp\/v2\/posts\/1257\/revisions\/1259"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.lawctopuslawschool.com\/blog\/wp-json\/wp\/v2\/media\/1260"}],"wp:attachment":[{"href":"https:\/\/www.lawctopuslawschool.com\/blog\/wp-json\/wp\/v2\/media?parent=1257"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lawctopuslawschool.com\/blog\/wp-json\/wp\/v2\/categories?post=1257"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lawctopuslawschool.com\/blog\/wp-json\/wp\/v2\/tags?post=1257"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}