# 2016 Private Company Equity Statistics Report

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2016 Private Company

Equity Statistics Report

ABOUT THIS REPORT

• Capshare offers a cloud-based cap table and electronic stock

management system

• Capshare has over 5,000 active companies, law firms, and investors

using our platform

• This report offers benchmark data and aggregated analysis for

startup executives and investors

• No personal or company-identifiable data is available in this report

EMPLOYEE VS. INVESTOR OWNERSHIP BY STAGE

100%

25%

75%

40%

55%

58%

68%

50%

100% 100%

75%

25%

60%

45% 42%

32%

0%

Common Only

Common +

Convertibles

Series

Seed

Series A Series B Series C Series D+

Employee Ownership Investor Ownership

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.

NON-PREFERRED STOCK OWNERSHIP % BY STAGE

100%

100%

100%

75%

75%

60%

50%

45%

42%

25%

32%

0%

Common

Only

Common +

Convertibles

Series

Seed

Series A Series B Series C

Median Value

Series D+

Mean Value

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.

EMPLOYEE OWNERSHIP TRENDLINE BY STAGE

110%

100%

83%

75%

Log Trendline

y = -0.378ln(x) + 1.0047

R 2 = 0.9953

60%

55%

45%

42%

32%

28%

0%

Common Only Series SEED Series A Series B Series C

Series D+

Median 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.

COMMON + RESTRICTED COMMON OWNERSHIP BY STAGE

100%

75%

86%

83%

50%

59% 47%

30%

29%

25%

17%

0%

Common

Only

Common +

Convertibles

Series

Seed

Series A Series B Series C Series D+

Median Value

Mean 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.

MEAN AND MEDIAN PRE-MONEY VALUATION BY STAGE

\$200,000,000

\$174.4M

\$150,000,000

\$100,000,000

\$50,000,000

\$0

\$1.1M

Common

Only

\$0.9M

Common +

Convertibles

\$62.0M

\$40.7M

\$25.6M

\$10.5M

Series Seed Series A Series B Series C Series D+

Mean Post-Money Median Post-Money

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.

PRE-MONEY VALUATION TRENDLINE BY STAGE

\$200,000,000

\$150,000,000

Exp. Trendline

y = 396314e 0.8945x

R 2 = 0.92402

\$174.4M

\$100,000,000

\$50,000,000

\$0

\$1.1M

Common

Only

\$0.9M

Common +

Convertibles

\$62.0M

\$40.7M

\$25.6M

\$10.5M

Series Seed Series A Series B Series C Series D+

Mean Pre-Money

PRE-MONEY VALUATIONS TRENDLINE

Mean pre-money valuations increase exponentially as companies progress to later

stages.

MEAN AND MEDIAN POST-MONEY VALUATION BY STAGE

\$200,000,000

\$196.4M

\$150,000,000

\$100,000,000

\$76.7M

\$53.5M

\$50,000,000

\$0

\$2.3M

Common

Only

\$3.7M

Common +

Convertibles

\$34.8M

\$12.8M

Series Seed Series A Series B Series C Series D+

Mean Post-Money Median Post-Money

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.

MEDIAN EMPLOYEE DILUTION BY STAGE IN PERCENTAGE POINTS

28%

22% 22%

21%

15%

17%

15%

14%

7%

0%

Series Seed Series A Series B Series C Series D+

“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.

NUMBER OF SHAREHOLDERS BY STAGE

200

200

164

150

100

90

50

30

38

51

17

0

Common

Only

Common +

Convertibles

Series Seed Series A Series B Series C

Series D+

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.

ISSUED AND UNISSUED OPTIONS BY STAGE

40%

30%

20%

15%

10%

10%

14%

14% 14%

13%

14%

0%

Common Only Common + Convertibles

Series SEED

Issued

Series A Series B Series C Series D+

Unissued

OPTION POOL PERCENTAGE BY STAGE

The option pool typically stays just under 15% at any stage, if you include authorized

but unissued options.

USAGE OF EQUITY INSTRUMENTS BY STAGE

Common

Preferred

RSA

RSU

ISO

NSO

SAR

SPR

Common Only

Common + Convertible

Series SEED

Series A

Series B

Series C

Series D+

0% 25% 50%

75% 100%

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.

RESTRICTED STOCK AWARDS (RSAs) BY STAGE

\$30

27%

6.2

7.0

\$23

4.9

5.3

3.6

3.6

\$15

14%

3.3

3.5

2.4

11% 11%

2.2

\$8

5% 5%

1.8

2%

\$0

Common

Only

Common +

Convertibles

Series Seed Series A Series B Series C Series D+

RSA Ownership %

RSA Shareholders

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.

WATERFALL ANALYSIS

• Capshare pioneered software-based waterfall analysis for

private companies

• Executives and shareholders can see a complete breakdown

of equity proceeds in any hypothetical exit scenario

• 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

THE FOLLOWING SLIDES PROVIDE

AGGREGATE WATERFALL ANALYSIS DATA

AGGREGATE EMPLOYEE WATERFALL VALUES BY STAGE (\$M)

\$70

\$63.07

\$53

\$35

\$29.61

\$17.87

\$21.53

\$18

\$2.28 \$3.71

\$8.26

\$0

Common

Only

Common +

Convertibles

Series Seed Series A Series B Series C Series D+

Mean Value

Median Value

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.

PER EMPLOYEE WATERFALL VALUES BY STAGE (\$000)

\$1,200

\$900

\$600

\$410.92

\$300

\$68.62

\$90.89

\$276.57

\$242.31

\$200.04

\$53.02

\$0

Common

Only

Common +

Convertibles

Series Seed Series A Series B Series C Series D+

Mean Value

Median 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.

AGGREGATE INVESTOR WATERFALL VALUES BY STAGE (\$M)

\$140

\$133.37

\$105

\$70

\$45.5

\$35

\$16.90

\$31.95

\$0

\$0.0 \$0.0

Common

Only

Common +

Convertibles

\$4.55

Series

Seed

Series A Series B Series C Series D+

Mean Value

Median 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.

PER INVESTOR WATERFALL VALUES BY STAGE (\$M)

\$4.0

\$3.37

\$3.0

\$2.0

\$1.0

\$1.15

\$1.35

\$1.15

\$0.0

\$0.0 \$0.0

Common

Only

Common +

Convertibles

\$0.31

Series

Seed

Series A Series B Series C Series D+

Mean Value

Median 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.

EQUITY ISSUANCE TRANSACTIONS BY STAGE

500

430

375

286

250

171

125

42

33

46

91

0

Common

Only

Common +

Convertibles

Series Seed Series A Series B Series C Series D+

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.

CAN WE HELP?

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• Offload complicated and time-consuming compliance work

VISIT www.capshare.com OR CALL US AT (415) 802-2305

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