At KingsCrowd, we collect as much data on each online raise as possible to get a complete understanding of an investment opportunity. Assessing the stake held by a founder in a company, whether in terms of ownership percentage or voting power, is a critical factor in gauging the founder’s commitment to a venture. This week, we dig into the breakdown of founder control across the 210 active early-stage equity raises, categorizing control into the following buckets: 0-24%, 25-49%, 50-74%, and 75%+. For companies with multiple founders, the percentage is cumulative. In a few weeks, we will look at the same metrics for growth-stage companies and identify any patterns. For early-stage companies, here are some of the key findings:
- A substantial 60% of founders in early-stage companies maintain control of 75% or more of the company. This is consistent with the early stage, where many companies haven’t secured external funding or appointed higher-ups, resulting in founders naturally holding the majority stake.
- A mere nine raises featured founders with less than a 25% stake in the venture. This low stake may raise concerns among investors, signaling a potential lack of commitment from the founder.
- Among companies with more than 75% founder control, 54 were fully under the founder’s control, meaning sole ownership or 100% voting power. While common in the early stages, it’s crucial for founders to relinquish some control to attract talent, secure investments, and scale the business.
- 82% of founders in early-stage companies exert control over 50% or more of the company.
