Wilson Sonsini's 2012 private financing reportBy http://profile.typepad.com/1237764140s22740 // February 12, 2013 in Emerging Companies, Startups, VCs
The new Wilson Sonsini report on private company financing trends is out, and it's even more interesting than usual.
In addition to keeping tabs on median valuations by round and other trends in VC preferred stock investment terms, the 2012 report is now tracking convertible note terms.
You've always been able to go the latest WSG&R report to buttress your argument, say, that pari passu liquidation preferences were normative and trending stronger. Well, now you can go to the report and confirm that a 20% discount on a pre-Series A convertible note is normal.
And there is new, useful, graphic rendering of historical data in the report.
This chart, from the report, shows the impact of first-round equity deals, in which Wilson Sonsini has been involved for the past five years, on the relative equity split between founders and investors. Among other things, it shows that founders keep more of the company post Series-A.
But the founders' line includes the option pool. This passage from the report explains:
"Many founders assume that the split in ownership between investors and founders in the first financing is about even. Since the option reserve almost always comes out of the founders' share, this would result in an approximate split of 50%/30%/20% among investors, founders, and employee stock option plans. The study, however, shows that founders actually have done considerably better than this at almost all times during the past five years. Except for a relatively short period during mid-2009, founders' and investors' percentages have varied in opposition in a narrow band between 45%/35% in favor of investors and 45%/35% in favor of founders through the end of 2011 (again, with a constant 20% for the option reserve)."
Chart from the Wilson Sonsini Goodrich & Rosati Entrepreneurs Report 2012.