Equity Data Pulse April 2024

Welcome to your latest Equity Data Pulse. This month we're digging into how much equity founders control as their companies scale up and go through new funding rounds. There's also an update on Europe-wide fundraising, which – unfortunately – has experienced slowing momentum in recent months.

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Tracking founder equity stakes across stages: good news for UK, bad news for Germany...

It's normal for founders' equity stakes to shrink over time as new investors come on board and more equity is allocated to employees and advisors. But the amount of equity founders hold on to differs country by country.

We compared average founder ownership across funding stages, spotlighting Germany and the UK, using data from the last six months. Across all geographies, founders control more than 80% of equity at incorporation, but while UK founders control 90% of their companies at incorporation on average, the average founder equity stake at incorporation in Germany is under 70%.

The rate at which founder stakes dilute as companies raise new rounds is fairly similar across countries. But perhaps because founders in Germany tend to start with smaller equity stakes, they control just 18% of the company's equity on average by Series B, as opposed to the UK average of 30%. Depending on how equity stakes correlate with voting rights, this could give UK founders more control over strategic decisions taken at board level.

...and investors own more of their German portfolio companies

If founders of German companies own less equity, what's the consequence for the cap table? Again looking at data from the last six months, we find that investors in German companies enjoy higher ownership stakes compared to investors in UK companies:

By Series B, investors in German companies control more than 70% of the company's equity on average, while investors in UK companies own just over 50%.

Employees in UK companies also own more of the company on average, owning 17% of the company's share capital by Series B compared to just 11% reserved for employees in German companies.

Funding rounds continue month-on-month decline

It's a good idea for founders thinking about fundraising to watch broader funding trends. Anyone tracking the last few editions of the Equity Data Pulse will have seen that new funding rounds have declined on a month-on-month basis over the last quarter.

The pace of the decline increased in April, with a drop of over 50% compared to March's new funding rounds:

Despite investor hype and big funding rounds closing in certain sectors, especially AI, fundraising is certainly slower compared with the back end of 2023.

Employee ownership: comparing the 50th and 75th percentiles across Europe and the US

When you sign your share option agreement at a new tech job, it might not seem like a big deal whether your company grants equity at the 50th or 75th percentile. But for companies and teams, percentiles really matter. Companies granting at the 50th percentile – where roughly half of their peers grant less, and half grant more – offer significantly less equity to employees than companies that grant at the 75th percentile (where they are more generous than approximately three quarters of their peers).

We analysed the difference (or delta) between equity grants at the 50th and 75th percentiles across five different markets, again looking at six months of data:

In the US, companies granting at the 75th percentile offer more than 3x the equity to employees compared to companies granting at the 50th percentile. This is a massive delta that affects everything from talent strategy to cap table management.

In Europe, the difference is not quite so marked, but it is still significant. Somewhat surprisingly, of the European markets we analysed France had the greatest delta between the 50th and 75th percentiles, while Germany's delta was the least pronounced.

Any equity data questions? Chat with Ledgy

Thanks for reading the Equity Data Pulse, your monthly digest of European equity trends. Did any of our findings surprise you? What's your experience owning equity as a founder or employee? And is there a piece of data you'd love us to dig into? Drop us an email and let's chat!