A study analyzing equity distribution by gender, race & ethnicity, & geography

Overview

Owning equity in a successful company can make a material impact on one’s financial well-being and ability to grow wealth. Historically, equity ownership has been concentrated in the hands of the few, and those few tend to have similar demographic backgrounds. We believe that such concentration is one of the primary factors fueling the exponential growth in the wealth gap. 

In response to this concentration, the  #ANGELS  called for a consistent measurement of diversity in equity ownership in 2018. With over one million equity owners and $1 trillion USD in equity value, Carta is the only data provider that can consistently report on equity ownership at scale. Since 2018, we have partnered with the #ANGELS to measure annually through the Table Stakes report. 

To create the most robust dataset possible, Carta has added the ability to self report gender, race & ethnicity, and parental status directly in the application itself. This year, thanks to our users who voluntarily and confidentially self-reported demographic data, we have enough data to analyze equity distribution by race and ethnicity in addition to gender. 

What we know is that there are four categories of corporate stakeholders that earn the lion’s share of the equity:

1. Founders

2. Senior executives

3. Early employees

4. Technical employees

Our data show that women and People of Color are underrepresented in each one of these categories. Sadly, there has not been meaningful change in representation since 2018 when we began this study. But what is not measured cannot be managed, so Carta is committed to continuing to do this analysis and provide the resulting information publicly every year. 

To this end, we recognize that identity intersects across gender, race & ethnicity, and therefore our findings may not fully represent the experiences of People of Color and non-binary individuals. As we continue to receive more self-reported data, we will work to incorporate intersectionality into our analysis. 

The work to move these numbers will take the entire ecosystem. Included in this report are companies dedicated to helping the ecosystem move these numbers, whether it be through compensation benchmarking, job training and placement, or creating more inclusive environments. 

As is often the case, education is another barrier to change. As one step toward change, Carta has developed an equity education program and is committed to providing that training to 100,000 employees across the country. Learn more about how you can participate for yourself or your organization at https://carta.com/resources/equity-essentials/.

Gender & equity ownership

Carta’s data for 2020 show there has been no substantive increase in overall representation in ownership for women. For every dollar in equity that men collectively own, women own just 47 cents.

While representation of women has increased since 2019, an encouraging leading indicator, we have not yet seen that translate to commensurate ownership. While women represent 35% of equity holders, they only own 23% of the equity.

Our data show that women employees own less equity largely because they lack representation in the positions that have the highest equity ownership, including senior executives, early-stage employees, and engineering roles. Below will examine each in turn.

Founders

Since 2016, the percentage of women founders in the startup ecosystem has stayed relatively constant, never surpassing 20%.

Our data show that certain sectors attract more women founders than others. Specifically, we see more women starting companies in healthcare, ecommerce, and food products as well as a growing number of women starting companies in consumer electronics. 

Importantly, outside of high valuation industries like healthcare, where the percentage of women founders is higher than average, we do not see a significant difference in post-money valuation of the industries in which women are founding companies. This leads us to believe that the need is simply to fund more women founders, regardless of industry.

Senior executives

Senior executive positions often earn large equity grants. An unfortunate and pernicious side effect of the glass ceiling for women is the lack of equity ownership and subsequent lack of wealth creation. Our data show that women are underrepresented in all roles leveled Director and above.

Companies are increasing representation in the C-Suite over time, reaching almost 40% representation in Series E companies. 

Early employees

Our data show that for most roles, women are hired consistently across departments of a company, with the notable exception of engineers. Engineering and Operations both see a higher proportion of women hired into those departments at Series E companies. Given the disproportionate value of early stage employee equity grants and the higher level of equity awarded to engineers generally, this difference is a contributing factor in the equity gap.

The 2020 data indicate that companies have success hiring gender diverse teams while growth rates remain below 200% year over year. When growth rates hit 200% or higher, however, the disparity in hiring becomes most pronounced. Notably, this effect is true for engineering but not for roles like customer success.

Technical roles

Our data show that technical roles like engineering tend to earn the largest equity grants at every level of seniority.

Furthermore, the majority of women employees in the ecosystem take roles in departments with lower equity compensation grants.

People of color & equity ownership

People of Color make up a very small proportion of employee stakeholders in this dataset, consistent with reports showing an overall lack of racial diversity in the startup ecosystem. Notably, of Black and Hispanic/Latinx employees surveyed, very few hold a significant amount of equity wealth. We looked to our data to help answer the question of why certain groups were holding a disproportionately low percentage of total equity as compared to their representation in the employee stakeholder ecosystem.

The majority of Black employees sit in non-technical roles such as customer success, sales, and operations. Comparatively, the majority of Asian and South Asian employees sit in engineering or product roles. 

Representation by departments contributes to the difference in equity ownership by race and ethnicity. Our data show that technical roles, like engineering, often see the highest equity grants at every level of seniority.

Equity grant size typically grows with seniority. According to our data, more White and South Asian employees sit in VP or higher roles, while comparatively Black and Hispanic/Latinx employees are underrepresented in these levels.

Additionally, equity value can also be associated with the funding stage an employee joins a company. According to our data, Black employees are more likely to join companies at later stages of growth, when compared to other People of Color. More specifically, for example, about 21% of Black employees joined at the series A round, as opposed to 30% of South Asian employees. 

Geography & equity ownership

Equity ownership has historically been concentrated in Silicon Valley, where talent pools and recruiting channels are both hyper-localized. COVID-19 and the shift to increased remote work create a potential opportunity to diversify talent location across the United States, and in doing so, move more equity ownership outside of Silicon Valley and other urban tech centers.

Overall equity ownership

One reason the wealth gap has grown so exponentially is that some are on the equity stack while others are primarily on the debt stack. Salary is a debt product with bi-monthly coupons, so grows linearly. But equity grows exponentially. Working at a successful private company opens a window to equity ownership and wealth creation for all employees that own a piece of that company. In 2020 there are 1.13 million equity holders on Carta, owning a combined $1.15 trillion in equity value, up from more 930,000 equity holders owning a combined $595 billion in equity value in 2019. We will continue to track these numbers in an effort to create more owners and distribute more wealth through equity.

Resources

Learn more about equity

• Equity Essentials educational program: Carta has developed an equity education program and is committed to providing that training to 100,000 employees across the country. Learn more about how you can participate for yourself or your organization at carta.com/resources/equity-essentials/. 

• Equity Resource Center: Want to learn the basics on a specific equity related topic? Visit Carta’s Equity Resource Center to learn more. 

Companies driving change in the ecosystem

• AllVoices: Everyone should be able to speak up safely. AllVoices is making that more possible by using tech to enable employees to send feedback, report harassment, bias, culture issues, and compliance concerns, anonymously.

• Black Girl Ventures: Black Girl Ventures funds and scales tech-enabled, revenue-generating businesses founded by people who identify as Black/Brown and woman. Their BGV Style competition is the largest pitch competition globally for Black women founders.

• Compa.as: With fair equity distribution must come fair total compensation. Compa.as

  uses AI to create accurate salary forecasts, even as more employees work remotely. Powerful insights give companies tools for fair compensation practices.

• Flockjay: Talent is distributed equally, but opportunities in tech are not. Flockjay

  is upward mobility through education and access and helping companies like Gusto and Zoom identify untapped sales talent and creating an entry point to tech for thousands.

• Girls Who Code: We need to close the gender gap in technology and change the image of what a programmer looks like and does – this is the mission of  Girls Who Code. The not-for-profit organization is building the world’s largest pipeline for future female engineers with more than 8,500 programs worldwide including after school programs, summer immersion opportunities and college networking opportunities for alumna.

• Jopwell: Representation matters. Jopwell is a career advancement platform for Black, Latinx, & Native American professionals, unlocking opportunities and partnering with companies to promote diversity.

• Pymetrics: Measure potential, not pedigree.  Pymetrics leverages behavioral science and audited AI technology to help enterprise companies build diverse teams of top performers, entirely bias free.

• Strive: A good manager knows how to promote inclusion and diversity. One of

  Strive‘s specialties is offering leadership development programs for groups traditionally underrepresented in leadership in tech.

• Syndio: Committed to creating a strong community of employers working to eradicate pay disparity, Syndio uses data science to help progressive leaders deliver on their commitment to equal pay across gender, race and ethnicity.

• theBoardList: With 16,000 members, 1,800 searches and 5,000 candidates, theBoardList is making board rooms more diverse one board member at a time. If you’re interested, it’s easy to create an account at http://theboardlist.com. 

• The Mom Project: Women shouldn’t have to choose between work and family. The Mom Project helps women remain active in the workforce by working with employers who are committed to designing and supporting a better workplace.

• Valence: Creating supportive communities is one of the most powerful ways to drive change and that’s exactly what Valence is doing by connecting Black professionals to create massive economic and social progress.

• 81 cents: Knowing is half the battle. 81 cents aims to close pay gaps for women and BIPOC by giving us the intel to navigate tough career conversations and get paid fairly.

Glossary

409A valuation: An independent appraisal that determines the FMV of a private company’s common stock. It’s usually used to figure out how much employees should pay to exercise (purchase) their stock options.  Learn more.

Cap table: A list of all the securities a company has issued and who owns them.  Learn more.

Common stock: Stock commonly reserved for employees.  Learn more.

Equity: The value of stock issued by a company.

Employee shareholder bill of rights: The most important thing companies need to get right for employees is equity and liquidity. At Carta, we believe that all full-time employee shareholders at venture-backed companies deserve.  Learn more. 

Exit: When a private company does something that radically changes the ownership structure of the company, such as going public or getting acquired.

FMV (Fair market value): What one share of a private company’s common stock would be worth on the open market.  Learn more.

Liquidity: When an asset (such as shares of stock) can be converted into cash.  Learn more.

Options: The right to buy shares of company stock at a specific price.  Learn more.

Preferred stock: Stock commonly reserved for investors.  Learn more.

RSU (Restricted stock unit): A promise from a company to give shares of company stock (or the cash equivalent) on a future date if certain restrictions are met. Later-stage and public companies often offer employees RSUs instead of stock options.  Learn more.

Securities: Financial assets that usually represent ownership in a company and hold monetary value. Securities include stock, convertible notes, warrants, and equity grants.

Shareholder/ security holder: Anyone who owns shares of company stock/securities in a company.

Stock appreciation rights: A bonus companies can give employees. Unlike stock options, employees don’t have to pay anything to receive this benefit—they simply receive the sum of the appreciation of company stock over a set period of time.

Strike price: The set price at which someone can purchase their stock options. It’s usually the FMV of the company’s common stock when the option grant was issued.  Learn more.

Tender offer: A company-sponsored liquidity event that typically allows multiple sellers to sell their shares either to an investor or back to the company.  Learn more.

Methodology

The Table Stakes analysis uses equity data from 520,000 employee stakeholders on Carta, representing over $32.3 billion in equity. Our company founder analysis represents 24,850 founders managing their cap tables on Carta.

This year, we used our growing dataset of employee level / department mappings and compensation packages to dig deeper into industry trends. Below is the breakdown of employee sample sizes per level / department. All role information in Carta is self-reported. We did not include roles that we could not easily categorize in a department (such as “team lead” or “analyst”).

Valuing equity

Market value for the equity grants is calculated using the difference of the latest fair market value of an option (as of the latest valuation) and the strike price, multiplying by the quantity of shares granted. We used  409A valuation, rather than investor valuation, since 409A valuations are required to be updated in Carta regularly (every year, or every time a company has a material event). We also recognize that prices offered during a liquidity event are typically not the same as FMV, therefore we use percent fully diluted at the time of option issuance as frequently as possible. 

Race & ethnicity data

This year, in support of racial and gender equality, Carta offered U.S.-based employee stakeholders an opt-in method for sharing demographic information for the purposes of aggregate, anonymized equity compensation analysis. 

• In total, 30,280 employees responded to our survey representing 6% of all U.S.-based employee stakeholders on Carta. 

• Respondents provided their self-described gender and race, along with job title, department, level, promotion status, zip code, base salary, and year of birth. These covariates are important in understanding the decision criteria when granting equity and were merged with additional leveling and compensation data Carta collects on its platform leading to role data for 110,306 (21%) of Carta stakeholders. 

• Because insights regarding race and role leveling are derived from a subset of Carta’s data, we expect insights to be directionally correct, but also to change as Carta’s race dataset becomes more complete in the forthcoming years. 

Matching gender

When available, Carta uses an employee’s self-identified gender (from the demographics survey) in this analysis. However, given the sparseness of the survey dataset, we categorized unknown genders by comparing the stakeholder’s first name to aggregate name data from both the U.S. Social Security Administration and  Gender API to yield a more complete dataset. Using a taxonomy does have its shortcomings and proper gender assignment will continue to be an active area of improvement for future reports.

• Using this approach, we labeled 61% of stakeholders as men and assumed 32% to be women. Approximately 6% of individuals were removed because we could not match their names and <1% self identified as another gender, but did not compose a large enough sample for analysis. We considered first names with less than 85% gender accuracy too ambiguous to classify. This may mean that names not popular in the U.S. were excluded more often.

• While we recognize that gender is non-binary, we were only able to associate names to women and men. We describe the equity gap using gender (woman/man) terms rather than sex (female/male) because we acknowledge sex does not always accurately reflect an individual’s identity. 

• To keep data anonymized, we classified gender using first names only independently of equity data.

Cents on the dollar

Cents on the dollar = mean wealth of women divided by mean wealth of men.Mean wealth = total current equity value, based on 409A valuation, divided by the total number of security holders.