A few weeks ago, we looked at founder control in active early-stage equity companies. In the early stage, it was evident and expected that the majority of founders owned more than half of the company (82% to be exact).  But what happens when we break down the same metrics for the growth-stage active equity raises?
These companies have one (or more) of the following parameters: $1 million or more in annual revenue, a valuation at or above $50 million, and $5 million or more in prior equity raised. Many of these companies have accepted venture capital funding or are further on in development compared to the early-stage batch that we evaluated. When it came to founder ownership or voting power, we saw a few key takeaways among the 130 active growth-stage raises:
  • 48% of founders in growth-stage companies maintain control over 75% or more of the company, compared to 60% of early-stage companies.
  • Similarly, 70% of founders control 50% or more of the company versus 82% of early-stage companies.
  • Just 8% of founders control less than 25% of the company. Even at the growth stage, this may be a red flag that indicates the founders are not committed to a venture.
  • Of the 62 companies where founders control 75% or more, 22 were fully under the control of the founder, meaning the founder(s) had 100% of voting power or ownership. This represents 17% of growth-stage companies. 26% of early-stage companies were under the sole control of the founder(s).
  • Overall, we see slightly less founder control at the growth stage, consistent with later stages of startup development, especially as founders accept institutional capital.