Q: On average, what percentage of a company does the “typical” entrepreneur own by the time of a “successful” exit? Obviously, huge YMMW, but what’s a reasonable expectation, say, assuming two founders, middle-of-the-road terms from investors, two or three rounds of funding, and an acquisition? Or is the range so broad as to be meaningless? If so, what’s a reasonable upper bound?
A: (Brad) The short answer is “the range is so broad as to be meaningless.” I love questions that don’t have precise answers, and this is a classic one. I’ve been involved in companies where the founder equity (sum of all equity the founders have at exit) ranges from less than 5% to greater than 90%. That’s a pretty big range.
If you assume the law of large numbers, you end up with a normal curve. Without doing a detailed analysis, most of the deals I’ve been involved with where there are two founders, middle-of-the-road-terms, and two / three rounds of funding result in a tighter range – probably in the 20% – 40% range. Again – it’s a normal curve so you’ll get higher and lower cases.
