A guide to VC fundraising 💰| Equity to employees 🧑💻| Dropbox's application to YC 🟠| Top reasons startup fails 📉
Here is the best of my research.
Welcome to Explore, your weekly Startups and VC podcast. 📈
This is a summary of all my research from the week.
Podcast of the week 🎧
This week, I released an episode with Nate Matherson, founder at Positional and two times YC participant, currently working on SEO tools for content teams. 🔎
Listen here or on Spotify/Apple Podcast right here 👇
A guide to VC fundraising 💰
Here is a guide to help you raise capital. 💰
I'm thankful to Crunchbase for putting it together
Must read pages (also added above):
⤷ Slide 5 - VC Rounds anatomy (investor types, company stage, amounts, funds use)
⤷ Slide 7 - Most common types of investors (Angel, VC, Family Office)
⤷ Slide 20 - What should be on your pitch deck?
Equity to employees 🧑💻
Here's a benchmark of equity given to employees. 📊
This graph from Peter Walker shows equity grants to employees sorted by when they joined and comparing 2022 vs 2023.
But what is an equity grant?
⤷ It's a non-cash compensation given to an employee where this person receives a percentage, now or in the future, of ownership in the company.
A startup is usually short on cash.
As such, equity is a great way to compensate employees without impacting cash-flows.
Grants may come in various forms but the most common is a Restricted Stock Unit (RSU) that requires employees to achieve certain milestones – such as years of service – to earn the stock.
Now, what does the graph tell us?
Here we can see the average percentage of ownership given to employees.
Let's focus on 2023.
Average Benchmark for 2023:
Hire 1: 1.00%
Hire 2: 0.75%
Hire 3: 0.50%
Hire 4: 0.42%
Hire 5: 0.31%
It's interesting to see the drop between hire 1 and 10.
And that's something that founders should bear in mind when they recruit new employees. They won't all be treated equal and as such the conversations might feel different.
In general, allocating equity is a tool to:
⤷ bring in great talent in your early days
⤷ retain employees and reduce attrition
⤷ boost profits and motivation in the company
⤷ create alignment between founders, shareholders and employees
The key here is to find a balance between giving enough to attract and retain talent while also having enough left for advisors and investors.
Dropbox's application to YC 🟠
This week was the last day left to apply to YC for the future batch.
Here is a reminder that Dropbox started small.
17 years later Dropbox is worth $8BN!
Here are 3 of my favorite answers:
⤷ Page 3: interesting sides projects from Dropbox's founder
⤷ Page 4: they were only 3-months in when they applied
⤷ Page 6: are we not all guilty of naming our files this way?
Top reasons startup fails 📉
Here are the top reasons why startup fails. 📉
And how to leverage it to your advantage!
First thing first: 90% of startup fail. Failing is ok. It is normal.
What are the reasons?
Cash, PMF, business model, pricing, burn out.. long goes the list.
You can look at the graphic below.
But how do you leverage this analysis?
I would recommend to look at this list and assess each risk on a scale from 1 (low) to 5 (high). The question being: am I at risk to fail because of [insert reasons]?
Make a table with your answer.
Every quarter reassess and check your evolution.
If you see your score decreasing in one category - work on it.
A lot about being successful is timing.
Would you be able to raise funds if you are trying for 2 years?
⤷ Certainly.
Do you have enough runway?
⤷ Probably not for 2 years.
With this tracker, you should see things coming before they put you in danger of failing.
Thanks for your support! 🙏
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Hugo 👋