Cash efficiency matters. Businesses that tend to be less cash needy have higher levels of ownership for the founders. For instance, ecommerce and hardware, both of which are sectors which tend to generate cash, had median founder ownership levels of 31% and 28% respectively, which is much higher than the median of the entire data set (15%).
Valuation matters too. Businesses that have a high level of founder ownership, but were very cash inefficient, were able to preserve founder equity because they raised subsequent rounds at very high valuations. Snapchat was a good example. Very few startups have this luxury and it shouldn’t be depended upon to preserve your ownership.
Options & small investors make up ~30%. Both the median and averages of the founders and VC sum to ~70%. That means smaller investors and employees/consultants owned 30% of these businesses at IPO. The lesson there is that small investors will be as important to your success as large investors, especially early on. Additionally, option pools are going to need to be set up along the way and sharing equity with your key employees will be critical to growing a large, IPO-worthy business.
Some VC have the Midas Touch. A number of VC pop up repeatedly in different deals. For instance, Bessemer, Sequoia, Benchmark, Andreesen, Greylock, DST, and Accel are each in multiple deals. There is a reason funds like these can raise billions of dollars, and it’s because of the success of the entrepreneurs they invest in.
i) the right way is to be cash efficient and raise as little money as possible to grow the business; or Visit us at blossomstreetventures.com. Cold email us directly at sammy@blossomstreetventures.com
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