Shares and ownership

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Who owns the studio?

An investor is interested in our studio (the Raising money lesson in this stage covers where investors come from). Their first question is simple: who owns it, and how much?

A company can be split into equal pieces called shares. Whoever holds shares is a shareholder, one of the owners. Owning 25% of the shares means owning a quarter of the company: a quarter of any profits paid out to owners, a quarter of the money if the company is sold, and usually a quarter of the votes.

Founders' shares

Our studio is an LLC (limited liability company, Stage 5): a business that is its own legal person, so the owners' own money is protected. LLC owners hold membership interests, often split into units, instead of shares. Many venture investors only invest in corporations, so US studios that raise money often convert into a C corporation. (A UK private limited company has shares from day one.) The idea is the same, so we say "shares".

The people who start the company get founders' shares. In our made-up example, the studio has 1,000,000 shares. Kai and Remy each take 450,000, and 100,000 are kept aside for future teammates.

True story: 10% of Apple for US$800

On 1 April 1976, Steve Jobs, Steve Wozniak and Ronald Wayne signed a partnership agreement for a new company, Apple Computer Company. Jobs and Wozniak got 45% each. Wayne, who wrote the agreement and drew the first logo, got 10%.

Eleven days later, Wayne pulled out. A company he had started before had failed, and the new one felt too risky. Jobs and Wozniak agreed to pay him US$800 for his 10%, and later US$1,500 more.

Founders' shares are a bet on the future. Kai and Remy's 450,000 shares each are worth little today, and nobody knows what they will be worth later.

Source: Sotheby's: Apple Computer Company partnership agreement, 1 April 1976 (lot 241), sothebys.com

Quick check

Remy owns 30% of the shares in a company. What does that mean?

  1. Remy owns 30% of the company, including a 30% share of the money if it is sold
  2. Remy is allowed to work on 30% of the code
  3. Remy gets paid 30% of every bill the company pays
Show the answer

Remy owns 30% of the company, including a 30% share of the money if it is sold

A share is a piece of ownership. Holding 30% of all shares means owning 30% of the company, so Remy gets 30% of any payout to owners and usually 30% of the votes.

The cap table

Every company keeps a cap table (short for capitalisation table): a list of every owner, how many shares they hold and what percent of the company that is.

The math is always the same: percent = your shares / total shares x 100. Kai has 450,000 of 1,000,000 shares, so Kai owns 45%.

Our total includes the 100,000 shares kept for future teammates, though nobody holds them yet. Counting every share that could exist is called fully diluted.

Investors, buyers and lawyers read the cap table first. A wrong one causes real arguments, so it must add up exactly.

Spot the error

cap-table.txt (made-up example)
Owner          Shares      PercentKai            450,000     45%Remy           450,000     45%Option pool    100,000     20%Total        1,000,000    100%

Remy typed up the cap table. Which line has a mistake?

  1. Line 2 (Kai)
  2. Line 4 (Option pool)
  3. Line 5 (Total)
Show the answer

Line 4 (Option pool)

100,000 out of 1,000,000 shares is 10%, not 20%. With 20% the percents add up to 110%, which is impossible. A cap table must always add up to exactly 100%.

Dilution: a smaller slice of a bigger pizza

An investor doesn't buy Kai's shares. The company creates new shares and sells them to the investor, so the money goes to the studio.

Made-up example: the investor pays $100,000 for 111,111 new shares, which is $0.90 a share. Now there are 1,111,111 shares in total, so the investor owns 10%. Kai still has 450,000, but that is now 40.5%, down from 45%. This shrinking is called dilution.

It isn't automatically bad. If the money helps the studio grow, 40.5% of a bigger company can be worth more than 45% of a small one.

Quick check

When an investor buys new shares, Kai loses some of Kai's 450,000 shares.

Show the answer

False

Kai keeps all 450,000 shares. The total number of shares grows, so the same number of shares is a smaller percent of the company. That is dilution.

Vesting: earning your shares over time

Imagine a teammate gets 10% of the studio, then quits after two months, keeping a big slice of a company they barely worked for.

Vesting fixes this: you earn your shares over time. A common US startup setup is four years with a one-year cliff. Leave before one year (the cliff) and you keep nothing. At one year you have earned a quarter, then a little more each month until all of it is yours at four years. Founders often vest too, which protects Kai and Remy from each other.

Vesting check

Kai, in the studio chat
Our artist is leaving after 8 months. They got 40,000 shares, vesting over 4 years with a 1-year cliff. How many do they keep?

What is the answer?

  1. None, because they leave before the one-year cliff
  2. 10,000, a quarter of the shares
  3. All 40,000, because shares are a promise
Show the answer

None, because they leave before the one-year cliff

Nothing vests until the cliff at one year. Leaving at 8 months means none of the 40,000 shares were earned, so they stay with the company for the next teammate.

Share options for the team

The 100,000 shares kept aside for future teammates are the option pool. A teammate who joins later, maybe even you, can get share options: the right to buy shares later at a fixed price set today, the strike price. Using that right is called exercising.

Made-up example: 1,000 options at a $0.90 strike price. Years later each share is worth $5. You pay $900 and get shares worth $5,000. If shares never rise above $0.90, the options are worth nothing. Options usually vest too, and tax rules for them differ a lot between countries.

Bolt says: Owning shares often means you get a vote too. Next lesson: who gets to decide what happens to the studio.

Fact-checked 11 October 2026