Making Equity Equitable: Announcing Capshare’s 2018 Private Company Equity Statistics Report

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Capshare Report Provides Insights from 10,000+ Cap Tables

Capshare, a high-growth cloud platform for cap table management, electronic-share tracking, modeling and waterfall analysis, and compliance for private companies, released its Private Company Equity Statistics Report today. The report offers benchmark data for startup executives and investors from the company’s 10,000+ cap tables. The data provides an insider view of how equity is actually structured in the most dynamic startup companies in the world. No personal or company-identifiable data is available in this report.

For the first time, Capshare analyzed the distribution of equity among all shareholders including founders, and VCs for each startup. Capshare’s report is the first comprehensive analysis of the “fairness” of equity grants among startup shareholders--creating a set of benchmarks to help entrepreneurs and investors make equity more equitable.

It is widely believed that the promise of equity fuels ambition, hustle and tenacity. It is the upside that drives a startup’s growth and experimentation. However, the report finds that startups, like so many other wealth-producing assets, distribute the wealth in a starkly unequal way. The top 10 percent of shareholders control just about 75 percent of the wealth-making potential of the typical startup. If a typical startup had 100 shareholders, the top 10 shareholders would own about 75 percent of the company. The other 90 would split the remaining 25 percent. Also, VCs and investors, not just employees, typically make up a portion of the top percent.

The great news is that for the first time ever, startups have the power to benchmark how they are doing in
fairness” as well as numerous other measures including dilution, option pool allocations, pre-money valuations by stage, etc...

"At Capshare our core goal is to empower, educate, and ultimately enrich the world’s shareholders. We believe the best way to do this is to provide companies the right kind of information to incentivize employees through equity grants,” shared Jeron Paul, Capshare’s CEO and Founder. Paul continued, “Even though startup equity is highly concentrated in the hands of a few early shareholders and investors, there are several things savvy startup management teams and investors can do maximize the value of equity to employees.”

The report includes the following insights:

  • Dilution at each stage of funding is actually extremely predictable.
  • Founders often own far less at exit than they might think
  • Star performers and average performers have wildly different experiences
  • Later rounds don’t always translate to increased returns for founders
  • If the typical startup had 100 shareholders, the top 10 shareholders would own approximately 75 percent of the company, and that includes VCs. So it’s typically around 5 people who own that plus VCs
  • Ownership distribution gets more and more unequal as the company has new rounds of funding
  • The “Ground Floor” effect shows that the chances of owning more than one percent of a startup is generally gone by series seed stage
  • With the exception of the “unicorns,” common stock shareholders tread water and the value of their equity stays relatively flat
  • Employees in many startups (even those performing only moderately well) can still make large amounts of money from their equity stakes--even if they don’t own more than one percent
  • This effect is even more pronounced with startups in the upper quartile of performance--even very small shareholders can make life-changing money
  • By leveling with employees and providing them with more information about the potential of their equity, startups can create a highly motivated team with a much higher degree of trust

For a complete look at the survey findings, click here.

About Capshare, Inc.
Headquartered in Salt Lake City, Capshare is a web-based equity management platform where private companies can issue stock and manage all of their equity in one place without getting bogged down in spreadsheets and paperwork. Over 10,000 companies, investors, and lawyers currently use the Capshare platform. For more information, visit http://www.capshare.com. Capshare was acquired by Solium in October 2017.

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Hannah Bloomfield
Capshare
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