David Cummings on Startups

Founder Equity Ownership at Time of IPO

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David Cummings

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In light of the flurry of VC-backed technology company IPO filings this year, one of the more interesting data points was the beneficial equity ownership of the co-founder(s) (e.g. what percentage of the business did they own).

Here are a few data points on founder equity ownership at time of IPO:

Now this doesn’t take into account founders that cash out some of their equity prior to IPO, which isn’t common but is noted in the ExactTarget S-1 (~$5 million). But, it appears that on average for venture-backed companies that reach an IPO, founders typically have between 4% and 15% of the equity (note that Marc Benioff of salesforce.com had over 30% of the equity at the time of IPO: source).

What else? What are your thoughts on the percentage of ownership founders have at time of IPO?

Comments

2 responses to “Founder Equity Ownership at Time of IPO”

  1. Joe Gallagher (@JoeGallagherIV) Avatar
    Joe Gallagher (@JoeGallagherIV)

    We often talk about % ownership figures and many of the founders get hung up on the figures, but it would be interesting to see what the ROI is for the founder(s). I would include in the ROI calculation their dollars invested while scaling as well as some calculated “sweat equity” investment (example: they could have been making $47/hr in a full-time position, but only paid themselves $17/hr for the 3+ years they spent on the company Pre-IPO, $30/hr worked would be added to their investment).

    Anyone have this kind of data?

    Reply
  2. @chriscombs Avatar
    @chriscombs

    Also worth noting about Yelp’s IPO is that founders Jeremy Stoppleman and Max Levchin each took $15M off the table during their Series E financing from Elevation Partners.

    Their solid equity position at IPO, like Benioff at Salesforce, was mostly from being able to bootstrap the business with their own personal funds from previous exits (i.e. PayPal and Oracle).

    Reply

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