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What it is?

Pre-equity is a term used in Ekiter to define the amount of tokens you have in the project's Smart Contract at Blockchain + your e-signature on the correspondent private document related with it.

So in case the business model is validated, you will legally hold a representation in the startup company foundation. (Equivalent to the amount of pre-equity you have)

In other words, pre-equity is the amount of shares you will get in the company foundation in case the business model is successfully validated.

But why?

This is the way we find to minimize bureaucracy during the business model validation process. Thanks to pre-equity, entrepreneurs will be able to receive funds for the business model validation without the need of creating a company

So they can focus on the validation and development of their product carefree of bureaucracy, extra money and time spent on the foundation of the company.

Remember that almost 8/10 startups fails at this early stages, that means they have to shut down the company. That process is more time and money invested in something that already failed.

And what happens with the pre-equity if the project fails?

When a project fails during the business model validation, the entrepreneur team will be able to close the project as failed at Ekiter. Meaning that there won't be any company from it.

Because there won't be any company, the pre-equity won't be used at any company foundation, meaning that it's value will be nothing.

And now what?

Well, the bad thing is that as a user your investment has failed, but the good thing is that there is no more process. As everything was linked in the clauses of a private contract between users, no additional management has to be done. The project has been closed and no one has to waste any more time or money on it.