The founders of DAN Fund’s 9 portfolio companies own anywhere between 5% and 22% of the business. We decided to take a look at the ownership levels of 47 tech companies (45 SaaS, 2 hardware) to determine the typical level of ownership of the founder/CEO at exit. The data is below and at the following link.
|New Relic, Inc.||Lewis Cirne||2014||27.30%|
|Castlight Health||Giovanni Colella||2014||8.10%|
|Five9, Inc.||Michael Burkland||2014||6.00%|
|MobileIron, Inc.||Robert Tinker||2014||5.00%|
|Box Inc||Aaron Levie||2014||4.10%|
|RingCentral, Inc.||Vladimir Schmunis||2013||19.60%|
|Cvent, Inc.||Rajeev Aggarwal||2013||16.00%|
|Veeva Systems Inc.||Peter Gassner||2013||13.50%|
|Benefitfocus, Inc.||Shawn Jenkins||2013||13.36%|
|Marin Software||Christopher Lien||2013||8.80%|
|Qualys, Inc.||Philippe Courtot||2012||39.56%|
|Jive Software, Inc.||Anthony Zingale||2011||7.56%|
|Proofpoint, Inc.||Gary Steele||2011||6.87%|
|RealPage, Inc.||Stephen Winn||2010||54.00%|
|BroadSoft, Inc.||Michael Tessler||2010||3.70%|
|Intralinks||J. Andrew Damico||2010||2.60%|
|Medidata Solutions||Tarek Sherif||2009||8.90%|
|LogMeIN, Inc.||Michael Simon||2009||7.95%|
|SPS Commerce, Inc.||Archie Black||2009||3.10%|
|Athenahealth, Inc.||Jonathan Bush||2007||5.30%|
|LivePerson Inc.||Robert Loscascio||2000||27.30%|
|Ultimate Softare||Scott Scherr||1998||4.90%|
As you can see from the 47 companies which IPO’d between 1998 and 2015 (median was 2011), the CEO’s owned on median 8.1% of the business and on average 13.81% of the business. The range of ownership was wide, as the CEO of Secureworks owns 0% (granted, he wasn’t the founder) and the CEO of RealPage owns 54%.
As the CEO of a Series A level business or late stage startup, keep in mind that a good board will grant you options along the way to make sure you’re not suffering too much dilution with each round. So, if you’re at 8% to 13% ownership today, you’ll of course suffer dilution with each round, but less so than investors. Even before the IPO, 33 of the 47 CEOs of the companies listed above received option grants with valued up to $7.8mm (CEO of Fitbit).
Of course, the best way to preserve your level of ownership as a CEO is to be as cash efficient as possible so you don’t suffer the dilution that comes with raising money. The main source of dilution for a CEO is, by far, from raising capital so the sooner you can achieve cash break even, the sooner you can stop getting diluted.