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the problem with using stats for things like this is it's not a lottery ticket. you don't have the same odds as everyone else playing the game if you're good, you have 100x the odds most of these stats are weighed down by people who - never had an idea that needed VC - didn't even know what that means - and so raised money from VCs who couldn't even tell that
💸 You think this is crazy low but ~5% ownership probably the most common final % most VC funded startups will have when they work out, especially when you have a co-founder Raising money is not free, people don't give you money out of charity, they buy a little slice of your company every time they invest, so in every funding round you sell a share of your company's ownership for money, that money you use then to grow more, in the hope that your part becomes more than the ownership you just gave away Median ownership for single founders (via @cartainc): Seed: ~56% Series A: ~36% Series B: ~23.5% Series C: ~16.5% Series D: ~10% Series E: <10% Now if you have one co-founder (most startups!): Seed: ~28% Series A: ~18% Series B: ~11.75% Series C: ~8.25% Series D: ~5% Series E: <5% What if you're one of 4 co-founders: Seed: ~14% Series A: ~9% Series B: ~5.875% Series C: ~4.125% Series D: ~2.5% Series E: <2.5% Now imagine you get acquired after one of these funding rounds for $1,000,000,000 ($1 billion is a lot!), how much are you left with? Money made with $1B sale for single founders: Seed: ~$560 million Series A: ~$360 million Series B: ~$235 million Series C: ~$165 million Series D: ~$100 million Series E: <$100 million Now if you have one co-founder (most startups!): Seed: ~$280 million Series A: ~$180 million Series B: ~$117.5 million Series C: ~$82.5 million Series D: ~$50 million Series E: <$50 million What if you're one of 4 co-founders: Seed: ~$140 million Series A: ~$90 million Series B: ~$59 million Series C: ~$41 million Series D: ~$25 million Series E: <$25 million But let's be more realistic, the median acquisition value for a VC-backed startup sits at approximately $71 million: For single founders: Seed: ~$39.8 million Series A: ~$25.6 million Series B: ~$16.7 million Series C: ~$11.7 million Series D: ~$7.1 million Series E: <$7.1 million Now if you have one co-founder (most startups): Seed: ~$19.9 million Series A: ~$12.8 million Series B: ~$8.3 million Series C: ~$5.9 million Series D: ~$3.55 million Series E: <$3.55 million What if you're one of 4 co-founders: Seed: ~$9.95 million Series A: ~$6.4 million Series B: ~$4.2 million Series C: ~$2.9 million Series D: ~$1.8 million Series E: <$1.8 million Okay last one (this post is getting too long 😊), we know 1) the median time of acquisition is around Series A (quite early actually), and 2) we know the median acquisition value is $71M, so now we can tell you the median expected outcome for a startup that gets acquired: Single founders: ~$25.6 million One co-founder: ~$12.8 million One of 4 co-founders: ~$6.4 million Getting acquired itself is a remarkable event though as most startups are by definition doomed to fail, only ~15% of startups ever get acquired, so the expected outcome with probability included is: Single founder: ~$3.84 million One of two co-founders: ~$1.92 million One of four co-founders: ~$960,000 P.S. we did not include taxes and liquidation preferences, the investors may receive their preference before common shareholders receive anything, meaning founders receive even less, but we also didn't include taking money off the table in earlier rounds by founders to be fair, so they balance each other out a bit Not saying this is bad btw, it's just how the VC game works but good to write it out and be aware of how it works VC-backed startups shoot for the moon, it's one of the few ways you can have a crazy big payout and become an actual billionaire which is very rare as a bootstrapped founder with your own money!
sold my first startup to constant contact for $15M and. moved back home with my parents. that's what 4.8% ownership buys you
Great suggestion by @sungamma: "And divide by median time to acquisition of 6 years for annualized earnings above salary" Median expected outcome for a startup that gets acquired in annualized earnings: Single founders: ~$4.27 million/year One co-founder: ~$2.13 million/year One of 4 co-founders: ~$1.07 million/year 15% odds of getting acquired in annualized earnings: Single founder: ~$640,000/year One of two co-founders: ~$320,000/year One of four co-founders: ~$160,000/year Oddly close to tech salaries right? That's how expected value in economics works!
💸 You think this is crazy low but ~5% ownership probably the most common final % most VC funded startups will have when they work out, especially when you have a co-founder Raising money is not free, people don't give you money out of charity, they buy a little slice of your company every time they invest, so in every funding round you sell a share of your company's ownership for money, that money you use then to grow more, in the hope that your part becomes more than the ownership you just gave away Median ownership for single founders (via @cartainc): Seed: ~56% Series A: ~36% Series B: ~23.5% Series C: ~16.5% Series D: ~10% Series E: <10% Now if you have one co-founder (most startups!): Seed: ~28% Series A: ~18% Series B: ~11.75% Series C: ~8.25% Series D: ~5% Series E: <5% What if you're one of 4 co-founders: Seed: ~14% Series A: ~9% Series B: ~5.875% Series C: ~4.125% Series D: ~2.5% Series E: <2.5% Now imagine you get acquired after one of these funding rounds for $1,000,000,000 ($1 billion is a lot!), how much are you left with? Money made with $1B sale for single founders: Seed: ~$560 million Series A: ~$360 million Series B: ~$235 million Series C: ~$165 million Series D: ~$100 million Series E: <$100 million Now if you have one co-founder (most startups!): Seed: ~$280 million Series A: ~$180 million Series B: ~$117.5 million Series C: ~$82.5 million Series D: ~$50 million Series E: <$50 million What if you're one of 4 co-founders: Seed: ~$140 million Series A: ~$90 million Series B: ~$59 million Series C: ~$41 million Series D: ~$25 million Series E: <$25 million But let's be more realistic, the median acquisition value for a VC-backed startup sits at approximately $71 million: For single founders: Seed: ~$39.8 million Series A: ~$25.6 million Series B: ~$16.7 million Series C: ~$11.7 million Series D: ~$7.1 million Series E: <$7.1 million Now if you have one co-founder (most startups): Seed: ~$19.9 million Series A: ~$12.8 million Series B: ~$8.3 million Series C: ~$5.9 million Series D: ~$3.55 million Series E: <$3.55 million What if you're one of 4 co-founders: Seed: ~$9.95 million Series A: ~$6.4 million Series B: ~$4.2 million Series C: ~$2.9 million Series D: ~$1.8 million Series E: <$1.8 million Okay last one (this post is getting too long 😊), we know 1) the median time of acquisition is around Series A (quite early actually), and 2) we know the median acquisition value is $71M, so now we can tell you the median expected outcome for a startup that gets acquired: Single founders: ~$25.6 million One co-founder: ~$12.8 million One of 4 co-founders: ~$6.4 million Getting acquired itself is a remarkable event though as most startups are by definition doomed to fail, only ~15% of startups ever get acquired, so the expected outcome with probability included is: Single founder: ~$3.84 million One of two co-founders: ~$1.92 million One of four co-founders: ~$960,000 P.S. we did not include taxes and liquidation preferences, the investors may receive their preference before common shareholders receive anything, meaning founders receive even less, but we also didn't include taking money off the table in earlier rounds by founders to be fair, so they balance each other out a bit Not saying this is bad btw, it's just how the VC game works but good to write it out and be aware of how it works VC-backed startups shoot for the moon, it's one of the few ways you can have a crazy big payout and become an actual billionaire which is very rare as a bootstrapped founder with your own money!
@levelsio It’s not. Most startups get acquired around Series A. And by Series E, your 5% could be worth billions. Why the fearmongering?
@levelsio also to make it realistic, your ended up with the average solo founder exiting with ~$3.84 million if you personally had an idea that was venture scale, the odds of you exiting at that low of a number are probably near zero