Founders: here's how much of your company investors are asking for. Data from 1,229 primary rounds raised on Carta in 2023 so far - US only, priced equity only, apologies in advance to the international audience! First column in the chart shows the median percentage dilution for each venture round. So a typical Seed round has the founders giving up 20.5% of the company to their seed investors. But medians in regards to dilution obscure some wide distributions. So I broke out the rounds into tiers of dilution, each tier representing 5%. You can see that within the Seed round row, 26% of Seed rounds gave up between 20% and 24.9% equity. Some key takeaways: • Series A and Series B seem to have the widest distribution - rounds raised in this two stages are all over the place in terms of dilution. • Seed rounds cluster around 20% - but you'll also need to consider the dilution from any SAFE or convertible notes raised previously (which is not visualized below). • These bubbles refer to primary rounds only (so your initial Series A, for instance). If you go back to current investors and raise a bridge round, the dilution will be substantially different. Obviously, each round is a unique negotiation between the founders and investors. Founders want to hold on to a significant stake in the company they've created - and investors need a certain allocation in order to for their fund economics make sense. Always a tricky conversation, but hopefully these benchmarks help set the terms! Don't miss our full report on all startup data from Q2 coming out at the end of the month - sign up at the URL in graphic. #cartadata #dilution #founderequity #founders #venturecapital #fundraising
Super helpful as always Peter Walker. My experience, and this is the talk track I’ve always shared, is that founders should expect to sell 20-30% of the company, per round. If they start with 100%, and sell 25% over 4 rounds, dilution goes 75% to 56% to 42% to 33%. Historical data has trended here, and that seems in line with what you show for early stage deals. It’ll be interesting to see if later stage deals start getting larger and more dilutive when the recovery comes. My supposition is that they are abnormally small in 2023 due to economic conditions (and as we all know, valuation adjustments have been most punishing in the late stage, so that’s an additional wet blanket), and that they’ll trend up over time. But we’ll see. I look forward to your ongoing reporting to see if I am right or if am badly wrong!
What’s the point in these numbers if SAFEs and convertibles are not counted in? 🤔 That often is a big chunk.
I wonder what the percentages are for Pre-Seed?
Peter Walker there is a lot of commentary on Twitter/LinkedIn right now on importance of "clean cap tables" - would love to see analysis that proxies the impact of cap tables on raising the next round. For example, take same parameters as this analysis, use all relevant historical data (20XX-2020), and do cuts by <15%, 15-30%, 30%+ and show by round the % that raised another financing round. Would love to see that!
“Give investors”?? You mean “sell to investors”
Amazing data 🤩
It would be interesting to compare this to graduation rates to Series A and see if there is a correlation Peter Walker. Ie does dilution at Seed positively correlate with graduation to series A?
I'm so curious to know the breakdown of investor type for Seed Round per dilution cluster (e.g., HNWI, angels, and VCs). and yes, factoring SAFES/Convertibles definitely throws a wrench into those figures 😅 . Solid intel!
Business samurai | General Manager, Rezoway USA
9moPeter Walker Here is the headline: "how much equity do founders GIVE...etc". GIVE. Seriously! GIVE? Well in the "GIVING" context, investors provide perfectly liquid CASH for PROMISES of FUTURE RESULTS...generally BASED ON UNREALISTIC FORECAST. And the GIVING is done on valuation numbers that have preciously little to do with reality. That's the "GIVING".... In 90% of the cases in seed and series A, those unrealistic forecast will lead the company to insolvency. Of being bailed out with more cash. Basically, the founders are allowed to play with OPM (Other People Money) to demonstrate that their galaxy-changing idea will indeed change the galaxy. And in most cases, it will burst in flames. So there is NO GIVING. And I am sick and tired of that BS who constantly portraits the founders are the victims of vultures. The alternative: they build they galaxy-changing idea with their own money!