VC-backed founders: most of you will own less than 50% of your company after your Series A 😬
Is that surprising? It was to me, to be honest.
But the data is quite clear. The median ownership held by founders as a group after Series A is 37.2% (for digital companies) and 30.3% (for physical ones).
𝗗𝗶𝗴𝗶𝘁𝗮𝗹 = SaaS, Fintech, Edtech, etc. Standard software plays.
𝗣𝗵𝘆𝘀𝗶𝗰𝗮𝗹 = Hardware, Biotech, Med Device, Energy. Building things you can touch.
Why the gap between these two startups types? Really comes down to capital intensity. Typically companies building stuff in the real world require more capital to get off the ground and scale, which dilutes the founders to a higher degree.
Okay, I can hear the question in your head: does this mean the VCs control my company right after the Series A?
Not quite.
When you add in the reserved equity for the employee option pool, the median ownership for founders+employees is typically just over 50% after the A. So control doesn't shift fully to the investor side until Series B in many cases.
Still this dilution is pretty steep. A lot of changes have contributed to founder ownership decreasing slightly over time, especially the rise in pre-seed fundraising (Series As used to be for $2M-$3M bucks a decade ago, now its a $10M financing).
Neither good nor bad, just the market. Stay on top of that cap table!
#startups #founders #founderownership #dilution #VC #fundraising
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