2016 Private Company Equity Statistics Report

ABOUT THIS REPORT

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

• This report offers benchmark data and aggregated analysis for startup executives and investors

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

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

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 45% by the Series B 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 94% to 26% 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

94%90%

61%

45%

26%25%

11%

$210.8M

$75.1M

$38.5M$25.3M

$10.9M$0.9M$1.1M

$55,000,000

$110,000,000

$165,000,000

$220,000,000

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.

$0Common

OnlyCommon +

ConvertiblesSeries Seed Series A Series B Series C Series D+

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 = 373135e0.9232x

R2 = 0.93436

PRE-MONEY VALUATIONS TRENDLINE

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

$55,000,000

$110,000,000

$165,000,000

$0Common

OnlyCommon +

ConvertiblesSeries Seed Series A Series B Series C Series D+

Mean Pre-Money

$220,000,000

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

$210.8M

$75.1M

$38.5M$25.3M

$10.9M$0.9M$1.1M

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

$60,000,000

$120,000,000

$180,000,000

$0Common

OnlyCommon +

ConvertiblesSeries Seed Series A Series B Series C Series D+

Mean Post-Money Median Post-Money

$238.8M

$92.2M

$50.7M

$34.5M

$13.2M$3.7M$2.3M

$240,000,000

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. Dilution 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

55

110

165

220

0

Common Only

Common + Convertibles

Series Seed Series A Series B Series C

17

3038

52

99

Series D+

191

222

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%13%

15%

13% 14% 14% 15%

Issued

OPTION POOL PERCENTAGE BY STAGE

The option pool typically stays between 13-15% 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%

0%Common

OnlyCommon +

Convertibles

2.53.3

30%

1.8

3.5

5.3

7.0

Series Seed Series A Series B Series C Series D+

2.2

3.53.3

3.7

6.4

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%

28%

11%10%

3% 4%1%

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

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• The full report contains:

- Employee vs investor equity splits by company stage

- Founder ownership by company stage

- Average employee stock ownership of a company by stage

- Mean and median pre- and post-money valuations by stage

- Benchmark founder dilution rates by stage

- Option pool size benchmarks by stage

- For the first time ever, typical liquidity (or waterfall) values for

common and preferred shareholders

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