The key insight this week
As everyone knows, 2023 has not been kind to venture-backed founders.
But if you step back and look at a broader trend over the past 4 years, a founder-friendly data point stands out: median dilution.
Across every stage in primary venture rounds, founders are holding on to more of their companies. Median dilution in a primary Series A is down nearly 20% over this time period.
To restate: Founders used to sell about a quarter of their companies to investors in a Series A. These days they typically part with a fifth.
All the primary stages have seen a similar shift (although seed rounds have only seen dilution dip about 8%).
Now, I could speculate as to the reasons why. A couple come to mind immediately:
Strong shift to founder-friendly deals in the bubble period of 2021-2022
Increased professionalization of early-stage venture in general
Introduction of deal structure in lieu of allocation for some VCs
But I would love to hear your ideas!
Perhaps as the venture market rebounds over the coming 18 months, founders will find they own more of their companies than anticipated.
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