2016 private company equity statistics ... - alexander jarvis€¦ · employee ownership formula...
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2016 Private Company Equity Statistics Report
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Common + Convertibles
25%
50%
75%
0%Common Only
100%
Series Seed
Series B Series CSeries A Series D+
E M P LO Y E E V S . I N V E S T O R O W N E R S H I P BY S TA G E
EMPLOYEE VS. INVESTOR EQUITY BY STAGE
Employees retain a majority ownership stake in a typical investor-backed company
until the Series B stage. However, company founders still often lose the ability to
control a company by themselves after a Series A.
100% 100%
75%
25%40%
68%58%55%
60%45% 42%
32%
Employee Ownership Investor Ownership
EMPLOYEE DILUTION BY STAGE
If you use all non-preferred shares as a proxy for employee ownership percentage, you can see that employee ownership “decays” from 100% to around 32% by the time the company is at a Series D or higher stage.
Common + Convertibles
25%
50%
75%
100%
0%
Common Only
100%100%
75%
N O N - P R E F E R R E D S T O C K O W N E R S H I P % BY S TA G E
Series Seed
Series A Series B Series C
Median Value
60%
45%
32%
42%
Series D+
Mean Value
EMPLOYEE OWNERSHIP FORMULA
For the mathematically inclined, employee ownership almost perfectly fits a
logarithmic curve with each new round of funding. The “Employee Ownership
Formula” is: Employee Ownership = -0.38 * ln ( Number of Rounds of Funding) + 1.
E M P LO Y E E O W N E R S H I P T R E N D L I N E BY S TA G E
28%
55%
83%
110%
0%
Common Only Series SEED Series CSeries BSeries A
100%
32%
45%
75%
Series D+
60%
42%
Log Trendliney = -0.378ln(x) + 1.0047R2 = 0.9953
Median Value
FOUNDER OWNERSHIP BY STAGE
We can define “founder ownership” as all common and restricted common stock. Founder ownership decreases from 86% to 30% by the Series B stage. It could actually be a little lower in later stages as optionees convert options to common stock.
Common + Convertibles
25%
50%
75%
100%
0%
Common Only
C O M M O N + R E S T R I C T E D C O M M O N O W N E R S H I P BY S TA G E
Series Seed
Series A Series B Series C Series D+
Median Value Mean Value
86%83%
59% 47%
30%29%
17%
PRE-MONEY VALUATIONS BY STAGE
The distribution of pre-money valuations has a long-tail skewing toward a few companies with really high valuations so median values are significantly lower than mean values. Pre-money valuations grow rapidly in a company’s later stages.
$50,000,000
$100,000,000
$150,000,000
$0Common
OnlyCommon +
ConvertiblesSeries Seed Series A Series B Series C Series D+
$174.4M
$62.0M
$40.7M$25.6M
$10.5M$0.9M$1.1M
$200,000,000
M E A N A N D M E D I A N P R E - M O N E Y VA L U A T I O N BY S TA G E
Mean Post-Money Median Post-Money
Exp. Trendline
y = 396314e0.8945x
R2 = 0.92402
PRE-MONEY VALUATIONS TRENDLINE
Mean pre-money valuations increase exponentially as companies progress to later stages.
$50,000,000
$100,000,000
$150,000,000
$0Common
OnlyCommon +
ConvertiblesSeries Seed Series A Series B Series C Series D+
Mean Pre-Money
$174.4M
$62.0M
$40.7M$25.6M
$10.5M$0.9M$1.1M
$200,000,000
P R E - M O N E Y VA L U A T I O N T R E N D L I N E BY S TA G E
POST-MONEY VALUATIONS BY STAGE
Mean and median post-money valuations diverge increasingly at later stages. This would indicate that the values of a subset of very highly valued companies pulls the average up but most companies don’t achieve such high valuations.
M E A N A N D M E D I A N P O S T- M O N E Y VA L U A T I O N BY S TA G E
$50,000,000
$100,000,000
$150,000,000
$0Common
OnlyCommon +
ConvertiblesSeries Seed Series A Series B Series C Series D+
Mean Post-Money Median Post-Money
$196.4M
$76.7M
$53.5M
$34.8M
$12.8M$3.7M$2.3M
$200,000,000
7%
14%
21%
0%
28%
Series Seed Series A Series B Series C Series D+
M E D I A N E M P LO Y E E D I L U T I O N BY S TA G E I N P E R C E N TA G E P O I N T S
15%
22% 22%
17%15%
“TYPICAL” DILUTION RATES
Executives should expect dilution of between 15-25% in nearly any round no matter
the stage. However, dilution does appear to be smaller at the earliest and latest
stages of a company’s life. It peaks in the Series A and B.
N U M B E R O F S H A R E H O L D E R S BY S TA G E
50
100
150
200
0
Common Only
Common + Convertibles
Series Seed Series A Series B Series C
17
3038
51
90
Series D+
164
200
NUMBER OR SHAREHOLDERS BY STAGE
Number of shareholders often correlates with headcount but some companies offer
equity to a broader range of employees. Here is the median number of equity
shareholders at all stages.
10%
20%
30%
0%Common Only Common + Convertibles
40%
Series SEED Series BSeries A Series C Series D+
I S S U E D A N D U N I S S U E D O P T I O N S BY S TA G E
10%14%
15%
14% 14% 13% 14%
Issued
OPTION POOL PERCENTAGE BY STAGE
The option pool typically stays just under 15% at any stage, if you include authorized but unissued options.
Unissued
USAGE OF EQUITY INSTRUMENTS BY STAGE
Companies almost all use common, preferred, ISO, and NSO equity. Companies also
use RSAs, though somewhat less frequently. RSUs, SARs, and SPRs appear much
less frequently and typically in later-stage companies.
U S A G E O F E Q U I T Y I N S T R U M E N T S BY S TA G E
C o m m o n
P r e f e r r e d
R S A
R S U
I S O
N S O
S A R
S P R
25% 50%
C o m m o n O n l y
C o m m o n + C o n v e r t i b l e
S e r i e s S E E D
S e r i e s A
S e r i e s B
S e r i e s C
S e r i e s D +
0% 75% 100%
RESTRICTED STOCK AWARDS (RSA)
On average, RSAs represent a large ownership stake across a small number of
shareholders. This is because RSAs are frequently used by founders to vest each other.
$8
$15
$23
$0Common
OnlyCommon +
Convertibles
2.4
3.3
$30
1.8
3.5
5.3
7.0
Series Seed Series A Series B Series C Series D+
2.2
3.6
4.9
3.6
6.2
RSA Shareholders
R E S T R I C T E D S T O C K A WA R D S ( R S A s ) BY S TA G E
14%
27%
11% 11%
5% 5%
2%
RSA Ownership %
WATERFALL ANALYSIS• Capshare pioneered software-based waterfall analysis for
private companies
• Capshare’s waterfall analysis takes into account: - Liquidation preferences- Participation rights and caps- Conversion rates-Cumulative dividends- PIK dividends- Warrants with exercise prices less than their liquidation preference per share
• Executives and shareholders can see a complete breakdown of equity proceeds in any hypothetical exit scenario
T H E F O L LO W I N G S L I D E S P R O V I D E A G G R E G A T E WA T E R FA L L A N A LY S I S D A TA
EMPLOYEE WATERFALL VALUE BY STAGE
Assuming each company is worth its latest post-money valuation, non-preferred shareholders (employees) would receive the following values in a liquidation scenario. Median results are much lower than median because larger deals skew the average.
$18
$35
$53
$70
$0Common
OnlyCommon +
Convertibles
$2.28 $3.71
A G G R E G A T E E M P LO Y E E WA T E R FA L L VA L U E S BY S TA G E ( $ M )
Series Seed Series A Series B Series C Series D+
$8.26
$63.07
$21.53$17.87
$29.61
Median ValueMean Value
WATERFALL VALUE BY STAGE PER EMPLOYEE SHAREHOLDER
Per employee waterfall proceeds peak around Series A and decrease thereafter as companies hire more employees. Founders still make more money each round but on average, employees make less.
$300
$600
$900
$1,200
$0
$68.62$90.89
P E R E M P LO Y E E WA T E R FA L L VA L U E S BY S TA G E ( $ 0 0 0 )
$276.57
$410.92
$200.04
$53.02
$242.31
CommonOnly
Common +Convertibles
Series Seed Series A Series B Series C Series D+
Median ValueMean Value
INVESTOR WATERFALL VALUE BY STAGE
Assuming each company is worth its latest post money valuation, preferred shareholders (investors) would recieve the following values in a liquidation scenario. Again median values are much lower than mean values.
$35
$70
$105
$140
$0$0.0 $0.0
A G G R E G A T E I N V E S T O R WA T E R FA L L VA L U E S BY S TA G E ( $ M )
$4.55
$16.90
$133.37
$31.95
$45.5
CommonOnly
Common +Convertibles
Series Seed
Series A Series B Series C Series D+
Median ValueMean Value
INVESTOR WATERFALL VALUE BY STAGE
Investors make more and more per investor, even as the company grows. Investors proceeds are diluted far less than employee proceeds.
P E R I N V E S T O R WA T E R FA L L VA L U E S BY S TA G E ( $ M )
$1.0
$2.0
$3.0
$4.0
$0.0$0.0 $0.0
$0.31
$1.15
$3.37
$1.35$1.15
CommonOnly
Common +Convertibles
Series Seed
Series A Series B Series C Series D+
Median ValueMean Value
VOLUME (EQUITY ISSUANCES TO A SHAREHOLDER)
The average number of equity issuance transactions (including electronic stock issuances) increases rapidly as companies grow. The volume is much higher including non-issuance transactions.
E Q U I T Y I S S U A N C E T R A N S A C T I O N S BY S TA G E
125
250
375
500
0
42 3346
91
171
286
430
CommonOnly
Common +Convertibles
Series Seed Series A Series B Series C Series D+
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