Equity represents ownership in a company, typically in the form of shares, and is a crucial component for startups as it serves multiple strategic purposes. For startups, equity is important because it allows them to attract and retain talent by offering employees a stake in the company's future success, aligning their interests with those of the founders. Additionally, equity can be used to raise capital without incurring debt, which is vital for startups that often lack substantial cash flow or collateral. By offering equity to investors, startups can secure the necessary funding to fuel growth and innovation while maintaining operational flexibility. Furthermore, equity distribution reflects the value of contributions made by founders and early team members, fostering a sense of commitment and shared vision essential for navigating the challenges of building a new business.