With a number of successful tech IPOs so far in 2017, it’s a good time to revisit the idea that scaling a startup through to IPO is not only terribly expensive but also heavily dilutive for founders. Each round of funding helps the startup get to the next milestone, and requires selling 20% – 35% of the company to investors. Here are five 2017 IPOs and the founder/CEO equity based on the SEC filings (note that this is for the founder with the most equity and doesn’t include co-founders or secondary where they sell equity prior to the IPO):
- Redfin (not yet public but has filed – source pg. 114) – 3.7%
- MuleSoft (source pg. 134) – 5.9%
- Okta (source pg. 132) – 10.3%
- Yext (source pg. 133) – 9.8%
- Alteryx (source pg. 131) – 20.4%
With an average founder/CEO ownership of 10% at time of IPO, it’s clear most founders have to sell a significant amount of their company to reach substantial scale.
What else? What are some more thoughts on the average founder equity at IPO in 2017?
David Cummings on Startups 
Good warnings to revisit.
Certainly Im another believer of IPO only making sense with right conditions and well planned intentions esp. for high-growth startups. Excluding TPA tax benefits, which, may or may not apply, but strictly speaking apples to apples… Is overall wealth created for founders greater with an IPO vs M&A despite loss in equity share? Back of the napkin math Mulesoft founders are at $200M based on current market cap (received 45% increase from day one) which even on low end of equity share in the list seems Dave, Ross, and crew made out (only way out?) pretty well for a decade worth of work.
Worked on three of these ending in q2 ’17 timeframe, I would enjoy your thoughts on how much the good warnings may apply to late stage? D,E,F,G,H