Author Archives: Hervé Lebret

Data about equity of 600 startups – comments (4)

Fourth post of comments on the 600 startup data. Today, it’s about how equity is shared following my post yesterday which focused on founders’ equity.

A quick extract from the data gives the following average and median values:

So as a simple model, it is 10% for (2-3) founders, 20% for employees, 50% for private investors (VCs and BAs – business angels) and about 20% for public investors at IPO.

In addition the 20% for employees are made of 8% of common shares, 7% of granted options and 5% of available options.

Finally non-founding CEOs have 3%, VPs 0.8% and CFOs 0.6%.

Independant board members have as a group 0.4%, they are in general 2 to 3, so it is about 0.2% per director.

If you want to dig in the topic, you may be interested in the following slides:

Data about equity of 600 startups – comments (3)

Third post of comments on the 600 startup data. As I am not sure how many posts I will write about this, I created a tag #600startups.

I looked at the founders’ age yesterday; today it is about their ownership over time. Founders keep 12.5% of the company at IPO, a little more in IT (about 16%), less in health (7-8%). The median value is 8.5%.

The series A curve is misleading! Founders’ ownership is at IPO but the Series A ownership is at the time of the round itself, not at the time of the IPO…

Moreover, I built a simple model which is the following: the Series A ownerhsip is based on the ratio between their shares and the sum of these shares and the founders shares increased by 20% (this to take into account future hires): as a short illustration, if Series A took 40% in the first round, founders had 50% as 10% was reserved for future hires (i. e. 20% of the founders’ stake).

It’s also worth noticing the series A are pretty big, about $9M on average (median value is $4.5M), and possibly in several tranches (as it is quite common in biotech).

Data about equity of 600 startups – comments (2)

Second post of comments on (updated) data on 600 (former) startups, about (what I think) are interesting or intriguing results.

After venture capital in the first post, here are elements about founders.

The 600 startups gave me data about 1016 founders, al though there is an average of 2.3 founders per startup. I did not have the age of all of them, neither their role or ownership. The average age is 37.9, the median is 36. (This is age at foundation, I added this after a comment I received on April 9, 2020).

The following figures show some striking results about the age related to fields: founders are much older in the health-related fields, much younger in digital technnologies. It is more than 45 in biotech and 43 in medtech in comparison to 33 in software and Internet.

Data about equity of 600 startups – comments (1)

As a follow-up to my recent post on (updated) data on 600 (former) startups, here is a first post about (what I think) are interesting or intriguing results.

Without doing too much self-promotion, let me add that I have in the past already dealt with the topic as I mentionin the document or through the following illustration:

My first comment is that the differences linked to fields or geographies are not that big, whereas data evolved more over time (fifty years). Amounts of venture capital, years to IPO, sales, profits, employees are not that different for example except in biotech maybe, for sales and employees at least.

One important note: in my list of 600 companies, only 15 did not have venture capital (or at least private investors). Is there a bias here? I am not sure, but I could be wrong.

These “comment” posts will be short and I finish this one with a look at Series A, the 1st investment round. The amounts are substantial, $8M on average. I did a new analysis, i.e. to find out how much VCs take at this stage and on average, it’s … 47%. A little less in IT, a little more in healthcare, a little less in Silicon Valley, a little more in Boston.

If I bring it back to the percentage per million, that gives 22%, I let you think about this astonishing result … but we must also look at the median values, because all this is not gaussian as I have often say, but follows a power law. Median values are $4.5M for Series A in exchange for 45.5% and 10% for $M.

Updated data in equity of 600 (former) startups

The Covid19 virus has an indirect effect, we have more time at home and in front of computers. So I updated my data in startup equity from 600 companies for which information was available, mostly because they had filed to go public. Here is the full list of individual data.

If you cannot visualize the document on scribd, here is a direct link to the pdf entitled Equity_in_600_Startups-Lebret-April2020.

At the end of this 600+-page document, you’ll find some statistics, here they are again. I will probably come back to some results I find interesting not to say intriguing. Enjoy an react!

Some addtional comments in later posts:
1- About venture capital: on April 7 comments 1.
2- About the age of founders: on April 8 comments 2.
3- About the equity of founders: on April 9 comments 3.
4- How is equity shares: on April 10, comments 4.
5- About the equity of non-founding CEOS: on April 11, comments 5.
6- About valuation of startups: on April 12, comments 6.
7- What have they become: on April 16, comments 7.

Basic data about startups (funding, sales, profits, employees at IPO and years to IPO) by fields, geographies and periods of time.

Data about founders (age, ownership and nb. by startups) and other stakeholders by fields, geographies and periods of time.

Data about ownership of non-founding CEOs, VPs, CXOs, board members by fields, geographies and periods of time.

New data about ownership of series A investors by fields, geographies and periods of time.

Venture Capital, Nasdaq and Crises

When I published the book which is the “raison d’être” of this blog, I had shortly analyzed the correlations between venture capital level in the USA, the Nasdaq index and their relationship to “crises”. Each peak and bottom level could be easily explained. I updated it to today levels with idea of revisiting when we zill be out of the Covid19 crisis. Comments welcome!

Whats’s a startup? (part 4)

I used today again Steve Blank’s marvellous definition of a startup that I had used last time in 2013 here.

You can listen to him giving it in Helsinki in 2011 at Aalto University

or through his Mooc here:

It’s obvious once you heard it and took so many years to be designed!

In these uncertain times of Coronavirus, I can only advise you to relax. One way for me was tonight through Recomposed by Max Richter – Vivaldi’s Four Seasons.

Bubbles, bubbles, they have always been around! Here is Casper…

Speculation, bubbles, yes, they have always been around. I entered the VC world in the late 90s. Now we are in the unicorns era. Or were we?

I did my 537th startup cap. table a few days ago (see below). I had hesitated a little as I was not sure a company selling mattresses, even online, could be classified in my list of tech companies. But with VCs like NEA, IVP, Norwest on board and leading banks such as Goldman Sachs and Morgan Stanley as underwriters, it had all the needed pedigree. Or at least it looked like it.

Then I read Casper’s IPO is officially a disaster on CNN and Here’s why Casper’s disappointing IPO could spell disaster for other unicorns on Business Insider Nordic

What happened? Well the initial IPO price on the table below should have been $18, then it was fixed at $12 for the first day of trading and this morning CSPR is at $10.26. The unicorn is now a $400M company. And you may want to have a look at the price of the B, C and D preferred rounds on the table below. Yes disasters happen from time to time.

As a quick remined my latest list to be updated when I will have reached 550 tables.

Applied Sciences? Does it exist?

I had to wait many years to discover there was a book written about science and innovation which convincingly shows there is not such thing as a linear model of innovation described usually as Basic research → Applied research → Development → (Production and) Diffusion

Thanks to Laurent for mentioning to me Pasteurs Quadrant: Basic Science and Technological Innovation by Donald Stokes. There is more on Wikipedia.

Pasteur himself apparently said: “There is not pure science and applied science but only science and the applications of science”. More precisely he seems to have said according to Wikipedia again:
« Souvenez-vous qu’il n’existe pas de sciences appliquées, mais seulement des applications de la science ».
(Remember that there are no applied sciences, but only applications of science)
and
« Non, mille fois non, il n’existe pas une catégorie de sciences auxquelles on puisse donner le nom de sciences appliquées. Il y a la science et les applications de la science, liées entre elles comme le fruit à l’arbre qui l’a porté »
(No, a thousand times no, there is not a category of sciences to which we can give the name of applied sciences. There is science and the applications of science, linked together like the fruit to the tree that carried it.)

I have agreed with this for so many years and for the same reasons I never really understood the concept of R&D, I mean why the concepts of research and development would be associated in the same unit, but that is a slightly different topic!

Here is a long extract from Stokes (taken from a pdf found here) worth reading I think:

The examples from the history of science that contradict the static form of the postwar paradigm call into question the dynamic form as well. If applied goals can directly influence fundamental research, basic science can no longer be seen only as a remote, curiosity-powered generator of scientific discoveries that are then converted into new products and processes by applied research and development in the subsequent stages of technology transfer. This observation, however, only sets the stage for a more realistic account of the relationship between basic science and technological innovation.

Three questions of increasing importance arise about the dynamic form of the postwar paradigm. The least important is whether the neatly linear model gives too simple an account of the flows from science to technology. An irony of Bush’s legacy is that this one-dimensional graphic image is one he himself almost certainly never entertained. An engineer with unparalleled experience in the applications of science, he was keenly aware of the complex and multiple pathways that lead from scientific discoveries to technological advances-and of the widely varied lags associated with these paths. The technological breakthroughs he helped foster during the war typically depended on knowledge from several, disparate branches of science. Nothing in Bush’s report suggests that he endorsed the linear model as his own.

The spokesmen of the scientific community who lent themselves to this oversimplification in the early postwar years may have felt that this was a small price to pay for being able to communicate these ideas to a policy community and broader public for whom science was always a remote and recondite world of affairs. This calculation may well have guided the draftsmen of the second annual report of the National Science Foundation as they stated the linear model in the simplistic language quoted earlier in this chapter. In any case, these spokesmen did their work well enough that the idea of an arrow running from basic to applied research and on to development and production or operations is still often thought to summarize the relationship of basic science to new technology. But it so evidently oversimplifies and distorts the underlying realities that it began to draw fire almost as soon as it was widely accepted.

Indeed, the linear model has been such an easy target that it has tended to draw fire away from two other, less simplistic misconceptions imbedded in the dynamic form of the postwar model. One of these was the assumption that most or all technological innovation is ultimately rooted in science. If Bush did not subscribe to a linear image of the relationship between science and technology, he did assert that scientific discoveries are the source of technological progress, however multiple and unevenly paced the pathways between the two may be. In his words,

new products and new processes do not appear full-grown. They are founded on new principles and new conceptions, which in turn are painstakingly developed by research in the purest realms of science.

Even if we allow for considerable time lags in the influence of “imbedded science” on technology, this view greatly overstates the role that science has played in technological change in any age. In every preceding century the idea that technology is science based would have been false. For most of human history, the practical arts have been perfected by “‘improvers’ of technology,” in Robert P. Multhauf’s phrase, who knew no science and would not have been much helped by it if they had.

[…]

But the deepest flaw in the dynamic form of the postwar paradigm is the premise that such flows as there may be between science and technology are uniformly one way, from scientific discovery to technological innovation; that is, that science is exogenous to technology, however multiple and indirect the connecting pathways may be. The annals of science suggest that this premise has always been false to the history of science and technology. There was indeed a notable reverse flow, from technology to science, from the time of Bacon to the second industrial revolution, with scientists modeling successful technology but doing little to improve it. Multhauf notes that the eighteenth-century physicists were “more often found endeavoring to explain the workings of some existing machine than suggesting improvements in it.”

Tinkering and Innovation (without forgetting Christensen)

Tinkerings is not a word, I think, that is easily or commonly associated with innovation. And yet! It appears several times on this blog as indicated by the #tinkering tag. And here is the reference to a nice article by Paul Millier entitled The engineer, the tinkerer and the innovator (L’ingénieur, le bricoleur et l’innovateur). I’m not sure if you can have free access so here is a brief excerpt:

The other way of innovating is that of the “Tinkerer” [1], who, on the contrary, collects pieces to get an idea of ​​the whole. He collects disparate elements from the left and the right which he preserves “in case it could be useful”. He brings them together, he assembles them, he organizes and reorganizes until suddenly – almost surprisingly – it makes sense and the innovator can say “eureka”. Damn, but it’s obvious! How had we not thought about it before? The suitcase and the wheel existed separately from each other until the day when someone brought them together to make the suitcase on wheels. How could we imagine traveling without a suitcase on wheels today? This is a radical innovation.

[1] The term “Tinkering” used here has no derogatory character, quite the contrary. It corresponds to a profound distinction proposed by Claude Lévi Strauss in “La pense sauvage” (1962) between two approaches (both valid) that of the “scientist”, of the “engineer” who defines himself by a project, and that of the “Tinkerer” who deals with the “means at hand” (and therefore with the client in the case of innovation). This term is quite positive for this author as for all those who, in strategic analysis, semiotics or sociology, have appropriated this notion.

The word “Tinkering” in innovation, I discovered it with a magnificent text by Tom Wolfe, The Tinkerings of Robert Noyce, which I strongly encourage you to (re)read!

PS: Not mentioning the death of Clayton Christensen on 23 January 2020 would have been a mistake and just mentioning it as a postcript here is probably another one, but I could not say anything better than
1- The Economist – https://www.economist.com/business/2020/01/30/clayton-christensens-insights-will-outlive-him
2- or Nicolas Colin – https://europeanstraits.substack.com/p/what-europe-could-learn-from-clay
If you did not know Clayton Christensen, you are lucky, you can now discover his work!