I've been researching for over a year now as an aspiring entrepreneur, but I am still fuzzy on how equity gets distributed at every stage of company growth.
Is a set amount of "shares" created upon inception of the company? Or is it just a mutually agreed understanding that each founder "owns" a portion of the company and will get shares accordingly in the future? When shares are created, is there some standard number that most companies start with (e.g. 1,000,000 shares?)
Let's use an example of a small company with 3 founders. For ease of explanation, each founder agrees to split equity equally 33%-33%-33% upon creation of the company. So what happens next at the seed stage when a family member gives the founders 25k? How is it redistributed for a round of VC investment? How are founders compensated for releasing their own equity to make room for investors?