Previous discussions here suggest offering advisers something like 0.02 to 1.5 percent of equity in a company. And obviously, when it comes to investors, you face the question of what percent of the company for X number of dollars.
When I previously raised money for a startup, I was always very clear about explaining how many units the LLC was authorized to issue (10 million) and how many shares had been issued, and what the number of units being offered was in terms of all issued shares as well as all issuable shares.
In addition, until all shares are issued, the voting power based on issued share will be much greater than the percentage of ownership based on issuable shares.
But no one else seems to make this distinction when discussing giving so and so X% for their investment, or as an advisor, et cetera.
It seems to be an extremely important distinction to me. If issuable shares are never issued because the company becomes profitable without the need to sell or give away all those shares, then the percentage owned in real terms is much higher than the projected "worst case" percentage if every share is issued.
I'm guessing that "most people" must be privy to some convention I am too anally resistant to grasp (because in my mind, I always "insist" there are at least two ways to calculate percentage of ownership. The possible third and fourth ways being to project out how that ownership percentage will dilute if the company ends up authorizing the issuance of even more shares to raise more capital, either according to plan or contrary to plan, because things don't go right.)
So what do I need to understand to be sure I'm speaking and understanding the same percentage of equity language?