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Equity Data Pulse May 2024

6th June 2024
Joe Brennan
Content and Communications Lead
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Welcome to your latest Equity Data Pulse. We have an analysis of preferred and common share classes across Europe (with some attention-grabbing results for German founders in particular). We've also seen an uptick in new funding rounds raised after several consecutive months of declining fundraisings.

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Share classes: what do they tell us?

The impact of share classes, and the different conditions and privileges associated with owning one share class or another, has a big impact on company strategy and decisions made at board level.

Common stock is usually owned by founders and employees, while preferred stock is normally owned by investors. Generally, the more stock investors own in their portfolio companies, the more preferred stock those companies would issue.

We compared six different markets to gauge how much preferred vs common stock we see across European and the US. What can we learn from the data?

Across most markets, between 15% and 30% of the cap table being taken up by preferred stock looks to be the norm. (The data is stage-agnostic.) The exception is Germany, where preferred stock makes up almost 50% of companies' share capital.

This is a significant difference from other leading tech hubs and indicates that founders in German companies may have less control over board-level decisions than their peers in other markets, depending on the relationship between share ownership and voting rights.

May fundraising increases from April, bucking negative trend

After a difficult first half of the year for fundraising, May showed a 25% increase in the number of new funding rounds logged on Ledgy, a positive sign following the recent streak of monthly declines in new funding rounds.

Countries seeing notable month-on-month funding increases in May included the UK (number of new rounds up 40% from April), and Germany, where companies logged twice as many new funding rounds in May compared to April. Meanwhile, the number of new rounds from French companies declined month-on-month.

Valuations: is France struggling to keep up with Series A and B rounds in the UK and Germany?

We've tracked the last six months of valuation data to assess how Europe's main tech markets compare. During a tough period for fundraising, are founders in the UK, Germany and France securing the valuations they want?

The data shows that while median valuations are broadly similar at the seed stage, median Series A valuations increase more sharply in Germany and the UK compared to France. (All valuations are converted into euros.)

A lower valuation at one funding round might have a knock-on effect in subsequent financings. IT appears that lower Series A valuations for French companies may affect the Series B round too. The median Series B valuation in France is 38% lower than in the UK, and a huge 60% lower than the median Series B round closed in Germany

This is only six months of data, but it's worth bearing in mind that compromising on valuation might set investors' expectations lower at future funding rounds.

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!

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Joe is Ledgy’s Content and Communications Lead. He has over a decade's experience working in marketing and communications for scaling tech companies and global professional services firms.

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