It’s extremely unlikely founders own the majority of the company post Series B. In fact, it’s closer to 10% by the time a company exits. So I would say the article applies in most cases.
Extreme outliers. You have a better shot at winning the lottery or being struck by lightning than ever having a company that resembles Facebook or Amazon in any way, including founder compensation and ownership.
To answer the question though it’s all about leverage. You can’t go into a situation like VC funding without it. Leverage can almost be anything, but is commonly:
- revenue
- traction with customers
- traction with users (if d2c)
- a previous exit
- nepotism
It’s in a VCs best interest to take as much of the company as possible without causing disruption. That means making you feel like you didn’t get shafted in the deal. This dynamic shifts when you have leverage. So instead of you taking a term sheet and just eating whatever they give you, with leverage you set the terms. But again, you’ll need a lot of leverage, likely almost every point above, in order to get a deal that isn’t complete garbage (save for nepotism).
The funny thing here is that it makes running a startup/working at a startup relatively pointless. On average it’s probably about equal difficulty to convince the right person at a FAANG to invest in a pitch as it is to raise a series A. Except your more or less guaranteed to make ~1-2 million over the course of 4 years and you have a good option to make more via promotion.
You Lone the opportunity to be your own boss and the possibility of extreme upside. But it sounds like VCs are taking that away as well.
I wonder if any VCs have added options into the deal to increase founder equity later if company performance dramatically outperforms expectations.
The overlap between would-be successful founders and people that can not only pass the interview exams, but function within a FAANG is probably very slim.
You need high conformity and extreme inside the box thinking to thrive in FAANG. Conversely, you need essentially the opposite set of traits to be a successful founder.
Curious why you believe you need in the box thinking to thrive at a FAANG. I haven’t seen anything more than what you’d need to keep up with customer expectations of what your kind of company should be able to do.