# How Is Equity Calculated?

Learn how member equity is calculated and allocated throughout different events in the life style of a Vault
How to Calculate Equity: A Step-by-Step Guide

### Equity Distribution After The First Funding Round

Consider a case where Alice, Bob, and Charlie are forming a Vault. They each contribute 5 ETH in the initial funding round. The equity distribution is as follows:
• Alice: 5 ETH / 15 ETH --> 33.3%
• Bob: 5 ETH / 15 ETH --> 33.3%
• Charlie: 5 ETH / 15 ETH --> 33.3%
--> Total Vault value: 15 ETH
Since the contributions are equal, the equity percentage ownership is the same for each member.

### Equity Distribution After Investment and New Funding Round

Now that the Vault is funded, the squad started to operate. Consider a few common events that happen after the first funding round and how it affects equity distribution:
• They buy an NFT and spend all of the 15 ETH that was raised
• The NFT value then increases from 15 ETH to 30 ETH
• The squad decided to open an additional funding round to attract new members
• David joins in the new funding round and contributes 5 ETH, but Alice, Bob, and Charlie don't contribute to the new funding round
The equity distribution after the new funding round closes is then as follows:
• Alice: 33.3% * 30 ETH + 0 ETH = 10 ETH --> 28.57%
• Bob: 33.3% * 30 ETH + 0 ETH = 10 ETH --> 28.57%
• Charlie: 33.3% * 30 ETH + 0 ETH = 10 ETH --> 28.57%
• David: 0% * 30 ETH + 5 ETH = 5 ETH --> 14.29%
--> Total Vault value: 35 ETH
Note that in this calculation, the NFT value increase has been accounted for and accredited to the investors of the first funding round. David, who joined afterward, is joining at a different Vault Valuation. Therefore, despite having contributed the same amount of funds to the Vault (5 ETH), his equity percentage is lower than the stake of the earlier investors.

### Equity Distribution After Member Payout

Consider a case where a member wants to leave the Vault, in this case, Alice. Members can only be removed from the Vault if their equity percentage is 0%, i.e., they have been paid out fully. As per the calculation in the example above, Alice is owed 10 ETH, as this is the value of her equity share.
To distribute a member's share of the Vault's ownership, the Vault needs to generate liquidity either by selling assets or getting funding from new investors. Before a member can get paid, the whole group needs to agree by approving an Exit/Payout Member proposal.
After Alice's payout, the equity distribution is then as follows:
• Alice: 33.3% * 30 ETH + 0 ETH = 10 ETH; payout 10 ETH --> 0%
• Bob: 33.3% * 30 ETH + 0 ETH = 10 ETH --> 40%
• Charlie: 33.3% * 30 ETH + 0 ETH = 10 ETH --> 40%
• David: 0% * 30 ETH + 5 ETH = 5 ETH --> 20%
Note in this case that the equity percentage that Alice "gave back" to the Vault in return for her payout has been distributed to the remaining members according to their equity shares in the Vault.
Note: equity percentages of individual members are displayed with two decimal points in the app. Due to rounding errors, the sum of all members' equity percentages may not yield 100% at all times.