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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