November 12, 2011 
Equity is the portion of a business that belongs to owners.
Quite frankly, “book equity,” the difference between your written assets and liabilities, is not terribly useful to web entrepreneurs because our businesses usually have few assets on the books. We like to take advantage of Section 179 write-offs. Furthermore, as I’ve written before, web businesses should try to minimize their assets.
So book equity (assets minus liabilities) is not a great measure of your business’s value.
Now close your eyes. Equity is what you will one day sell when your company goes public, yielding hundreds of millions of dollars. Like FaceBook, Groupon or LinkedIn. This is your ownership in the business.
Many web businesses freely give away shares of ownership in exchange for work. Ever see The Social Network? This is very tempting in a start-up because equity doesn’t seem to be terribly valuable, and it doesn’t hurt your cash flow to give away stock. In the long-term, however, you are giving away your ownership in the company. Think long and hard before you do this.
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