
The Median Level of Founder Ownership at Exit - rmason
http://blossomstreetventures.com/blog_details.php?bcat_id=106
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wwalser
A few things make the data slightly misleading. In cases of multiple founders
(so most of the data points), only one founder seems to be represented by the
"Founder Ownership" percentage. Additionally, in some cases the percentages
are representative of voting rights not actual monetary value of said
"ownership".

This causes some founder/ceo/early teams to appear over represented: Sergey
Brin, Larry Page & Zuck, while others appear under represented.

I can't help but feel that these flaws make the final assessments tilted
toward the point of the article which appears to be something along the line
of `owning 11% at IPO is totally normal, don't sweat it`. This is VC content
marketing through and through. Additional note: "That means smaller investors
and employees owned 27% of these businesses at IPO." The idea that employee
pools make up a sizable chunk of most of these companies is completely
laughable.

~~~
LaurentVB
Also: the title. It is not "at exit", but really "at IPO", which might be the
most infrequent exit there is.

~~~
mi100hael
Yeah, it also doesn't appear to contain any that were bootstrapped. I wonder
if any bootstrapped startups have ever IPO'd.

My favorite startup exit is PlentyOfFish.com. 100% owned by one dude who made
over half a billion cash selling it to Match.com.

~~~
jhchen
Atlassian, which just IPOd this year, was famously bootstrapped. There are two
founders, each with 37.7% [1], so the table is misleading and the should
really be 75.4%. Atlassian eventually took funding from Accel, 8 years after
its founding.

It is also curious the table rounded Accel's ownership up (12.7 -> 13), but
truncated the founders' (37.7 -> 37).

[1]
[https://www.sec.gov/Archives/edgar/data/1650372/000155837015...](https://www.sec.gov/Archives/edgar/data/1650372/000155837015001685/filename1.htm#PRINCIPALSHAREHOLDERS_745377)

~~~
wwalser
Atlassian's funding wasn't typical VC growth money either. The first round was
taken off the table by the founders and was primarily a mechanism to get board
members in preparation for a US based IPO. They also took a second round, 100%
of which which went to early employees in the form of a secondary market sale
for stock options.

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drewvolpe
Taking a quick read, I see all sorts of issues with this dataset. Jay Hoag was
not founder/CEO of Netflix, he was a growth stage VC and these are likely not
his personal shares but his firm's. Dick Costello wasn't a founder of Twitter.
TripAdvisor was acquired by IAC in '04 and then spun out; Barry Diller wasn't
a founder.

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johnloeber
For all those wondering about Priceline (CEO Ownership 47%, VC Ownership 74%),
where the total ownership exceeds 100%: Walker Digital Corp, one of the VCs,
was founded by Jay Walker, the CEO of Priceline.

Also, Zuckerberg exceptionalism strikes again: he was the highest ownership-
retaining CEO on the list, at 57% (closely followed by others at 55 and 53).

~~~
anilgulecha
It's not actually 57% of facebook's value (since that would make him by far
the richest person).. It's voting rights. Facebook stock is split into 2
classes.. I think monetary value wise, he holds a much smaller chunk of FB.
Same for Larry Page/Sergey Brin for Google.

Rather than percentages, the median/mode of absolute monetary value would be
more useful, since that gives you a directly number you can compare to non-VC
startup (lifestyle startup). If you own 2% of a 100M VC startup, maybe it's
the same to fully own a 2M fully owned lifestyle startup.

~~~
kijin
Both monetary value and voting rights would be useful metrics, since different
founders care about different things. Zuckerberg is absolutely obsessed with
retaining control of his company, even at a significant cost to his net worth.

On a side note, I was like "wait a second, 2M is now considered a lifestyle
business?" but then I remembered that crazy P/E is the norm around here, so a
valuation of 2M probably means that the founder subsists on ramen... :(

~~~
bzbarsky
It's not "around here". It's more "around now".

Crazy P/E is the market outcome in any low interest rate environment. If an
investor wants to get 2% over the safe (read: government bonds) rate of return
and the safe rate is 4%, then the investor wants a 6% return and that gives
you price/profit ratio (not quite the same as P/E, I know, but for purposes of
lifestyle business income this is the relevant number anyway of about 16).

If the safe rate is 0%, then the investor is willing to settle for a 2% return
and you get a price/profit ratio of 50. Given identical profits that means 3x
the valuation.

In real life this is a bit more complicated, because investors may not
necessarily seek a simple additive percentage on top of the safe rate of
return, but the same dynamic plays out in general.

Or to put another way, say you have a lifestyle business with $100k/year of
profit. That's nothing too special. What valuation should that correspond to?
Depends on risk, of course, but $1-2M doesn't seem unreasonable; that
corresponds to 5-10% annual return, which is pretty good right now.

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alister
It would be interesting to see the same data on old tech companies for
comparison -- to see how the trends have changed.

I noticed Apple on the list, but I also like to see Microsoft, AutoDesk,
Cisco, UUNET, etc., and also _really old_ ones like Hewlett-Packard, Intel,
Texas Instruments, etc.

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tzaman
It may be my misunderstanding, but isn't 11% ridiculously low?

As I founder, if I sold almost 90% of MY company along the way, I would feel
like I didn't do good enough job of building it without relying too much on
other investors.

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TheDrizzle43
Turns out VC's don't give companies millions of dollars for nothing :)

~~~
tzaman
True, but you can hardly call a company you only own 11% of - your company.
It's someone else's.

But then again depends what and why your doing it. If that 11% is worth enough
to you (and the company is otherwise healthy), then you might not even care.

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mathattack
A couple low ones surprised me. How did Aaron Levine wind up with so little of
Box? Many cofounders to share with? Large server costs requiring VC? Down
round?

~~~
jasonshen
Box spent a lot of money on sales and marketing acquiring customers and so
IPO'd after in 2014 after being at a net loss of $168M over the course of
2013. Levie had to give up a lot of equity to justify raising more money. More
in this TC article: [https://techcrunch.com/2014/03/24/hotshot-ceo-aaron-
levie-wi...](https://techcrunch.com/2014/03/24/hotshot-ceo-aaron-levie-will-
only-own-5-7-of-box-when-it-ipos-investor-dfj-owns-25-5/)

~~~
mathattack
Thanks! That must have been humbling, though it got Box through the ordeal and
I am sure he is doing fine.

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wuschel
Making it to an IPO and owning n% is the platinum medal already. Anything else
is just bonus.

Would love to see more in depth comparison between the cases.

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rdlecler1
How did Bezos retain so much given their low margins? In today's age you would
have had a lot of dilution even with a lot of revenue.

~~~
mathattack
He was ruthless about keeping overhead low. Low margins kill you when you have
higher fixed costs. He also didn't need to share as much with co-founders.
They also had their IPO much earlier in the corporate life cycle than
companies do today. His dilution happened with and after the IPO.

~~~
rdlecler1
IPO is also a dilution event, as are any subsequent offerings. Still
surprising given their capital needs to grow quickly that he retained so much.

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xapata
A histogram would have been nice.

~~~
jastr
[https://docs.google.com/spreadsheets/d/15mMnFJDX1Qps1tO4CQeS...](https://docs.google.com/spreadsheets/d/15mMnFJDX1Qps1tO4CQeSPU8qkU8JMkcyzf8XczdBLiI/pubchart?oid=1900850255&format=image)

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dohertyjf
a) Would be better displayed as a sliding scale instead of a median. b) not
listing the real Twitter founders and their ownership is a huge oversight.

I'd be interested in how much equity each venture firm had for each of these
too.

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machbio
Amazon and Alibaba are not placed under Marketplaces.. What is the difference
between Marketplaces and E-Commerce, if someone could explain?

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heurist
It would be nice to see employee ownership and number of employees next to
these numbers. Don't forget the little guys!

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awl130
tl;dr 17%

