VCs, are you receiving as much ownership as before? – A 10-Year Data-driven Analysis

We continue to hear VCs tell us they believe ownership purchased by investors in a startup round (ownership percentage) is declining. So, in search of the truth, this week we dug into our proprietary dataset and analyzed over 240,000 rounds from around the world. To make sure the analysis is relevant and informative to current entrepreneurs and VCs, we limited our output to rounds that were executed within the last 10 years.

Here’s what we discovered

Similar to what we saw recently when we analyzed Post-Money Valuations Here we see what looks like a round number bias. It is much more likely for a VC round to acquire an ownership percentage such as 20 or 25% as opposed to a ‘not round’ number like 19%. We also find that the distribution spans a wide range with more weight in the 15-30% range.

We found that over the past 10 years, the average Information Technology round sold 22% of the company. And the average Healthcare round sold 29% of the company. Medians were slightly lower, as expected. We also found that the typical Healthcare round consistently sold more ownership than the average Information Technology round regardless of stage. 

But perhaps the most intriguing finding confirms what we have heard from VCs: there has been a steady decline in ownership acquired by VCs over the past 10 years. 

What do you think has caused a steady decrease in ownership?

After analyzing this data, here are some hypotheses we have that we may try to test in future posts:

• More money raised by VC funds and thus more competition to win deals
• Increased valuations
• Companies staying private longer and thus raising more and more rounds with less dilution per round
• Potential shifts in VC ownership strategy
• More capital efficient companies being funded, skewing the numbers recently

Any last questions? I’d love to hear your thoughts on why ownership is declining.

Reach out and chat with me (Collin West) on LinkedIn, Twitter..

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