Category Archives: Start-up data

Two great recent startup stories (not in Silicon Valley, but both acquired by Google) – part 2 : wiz.io

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Reading a few articles about Deepmind (part 1 of this post) and the founders of Adallom and wiz.io, I remembered other stories of European startups or those founded by Europeans. I’m thinking of Spotify (see my posts in 2022 and 2018) or VMWare (see an older post from 2010). We see that more or less curbed ambition has led to different results. Wiz or Spotify have valuations in the tens of billions, Deepmind, Adallom and VMWare (first acquisition) in the hundreds of millions, while the second acquisition of VMWare was also in the tens of billions. I don’t know if there’s a pattern or if I’m creating it artificially, but it’s a bit as if an acquisition in the hundreds of millions was a semi-failure linked to the fear of too much competition or the impossibility of pursuing an independent adventure.

The double adventure of the founders of Adallom and Wiz.io goes a little in that direction. I read a few articles which reference you will find at the end of the article. And I will give the lessons learned by Assaf Rappaport from these two stories. A first success, Adallom bought in 2014 by Microsoft for $320M then a second, wiz.com which Google offered to buy a few days ago for $32B (i.e. 100 times more…) Unlike Deepmind, I did not have access to specific documents, so I had to make some assumptions like some others (see [2]) and cross-check the information available online. Here are the two capitalization tables. But here too, the advice given (which I repeat below) is just as important as this data.

First of all, what I take from the tables:
– Four founders whose story is a classic in Israel (see [1]) created Adallom and then wiz.io. In reality, I am not a big fan of the concept of serial entrepreneurs, but wonder if wiz.io is not rather the scaling up of Adallom like VMWare (2nd period) was for VMware (1st period) or by pushing very hard the Nobel Prize of Demis Hassabis the scaling up of Deepmind! We read in the press that the founders had earned around $25M with Adallom according to some sources and $3B with wiz.io, also a factor of about 100x.
– The same venture capital funds and partners are the investors – Gili Raanan for Sequoia then Cyberstarts and Shardul Shah for Index. These are rare enough to be mentioned especially since these funds intervened at the seed stage.
– For Adallom, multiples of 24x for Series A, 7x for Series B, and approximately 2x for Series C.
– For wiz.io, multiples of 475x for Seed, 73x for Series A, 20x for Series B, 5x, 3x, and 2.7x for Series C, D, and E.

All of this is arguable, but not uninteresting, and there’s a bit of a lottery aspect to it. Don’t get me wrong. Success is rare, never guaranteed. I remember a startup that was offered a $300 million acquisition. The founders and/or investors declined, thinking they were worth more. In the end, the acquisition price was $10 million.

About the ambition and uncertainty, it is also worth reading Shardul Shah (Index) on LinkedIn (Index Ventures just cemented its place as one of the all-time VC greats). Here are some quotes : “I don’t know why we’re talking about averages — none of us are in the business of mean reversion.” […] “I’m not seeking average returns. I’m not seeking good deals—I’m looking for outliers.” […] “I don’t seek comfort. You have to be comfortable with being uncomfortable. We’re in the business of taking risk. I’m not a value investor, right? I believe in the power law.” […] “The hardest thing is identifying if you’re delusional or if you have conviction. Sometimes it can feel like a thin line.”

Finally I extract the lessons from Assaf Rappaport:
1. The team is more important than the idea. A startup is built not around an idea, which is going to change anyway, but around a team. The really good VC funds invest in talent, and not in products, ideas or business plans. And also: Don’t drag your feet when it comes to meeting with the best funds. Don’t leave them till the end.
2. One who listens to problems will find ideas. When you meet with customers, you’re not coming to convince them; rather, you’re there to learn from them. If you’re the one who spoke for more than a quarter of the meeting, it wasn’t a good conversation. Customers have problems that you didn’t even know existed, and the way to discover them is with question marks, not exclamation marks.
And also: You need some luck.
3. ‘No’ is the correct answer to determine whether the investor is serious. No matter what kind of offer you get – investment or acquisition – there’s only one response: ‘I really appreciate your offer, but no thanks.’ This kind of answer never deterred a determined investor or company – and if they’re not determined, they won’t invest in any case. And also: You need to prepare a media plan, both internal and external; when things leak, you’ll have only enough time to hit the Send button.
4. The exit is just the beginning of the hard work. On the day after being merged into a giant corporation, don’t sit back and wait until the options mature. Instead, adopt the commando approach: We’re part of a big army, but we belong to an elite unit.
5. Don’t be afraid of activism. In every company, a moment comes when you have to give the conservative corporate people a kick, and then go ahead and act. To be the best workplace and to recruit the best workers, you need to be brave and take a stand, engaging in social activism that gives rise to tremendous team spirit.
6. Take a deep breath and don’t exhale too soon. You shouldn’t be blinded by big money, instead, use it to quickly acquire paying customers, turn down acquisition offers of hundreds of millions of dollars, and grow the company rapidly so it will become a unicorn.
7. Today, it’s possible to overtake everyone with a computer and Zoom

Once again, risk-taking and limitless ambition.

References :
[1] : 7 lessons from reaching a $1.7 billion valuation in just one year https://www.calcalistech.com/ctech/articles/0,7340,L-3904610,00.html
[2] : WIZ, Esprit, es-tu là? Comment les fondateurs de Wiz refont des miracles après le succès d’Adallom https://trivialfinance.substack.com/p/wiz-esprit-es-tu-la

Two great recent startup stories (not in Silicon Valley, but both acquired by Google) – part 1 : DeepMind

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I probably have to admit a bias in favor of startups led by tech founders. It is what I have been advocating for decades now. So when I read about stories going that way, I am more than happy. Recently I was mentioned by friends a documentary movie entitled The Thinking Game.

I do not know why I had not looked at DeepMind before all the more it is pretty easy to get information about British companies and this is a British startup. So you read me, I built its cap. table when it was acquired by Google in 2014 for about

What I read in the table:
– 3 or 4 main cofounders, but Demis Hassibis had the biigest initial stake (80%),
– investors took high risk as the company did not have that much but talent initially, (and no revenue until acquisition ?)
– the main or at least most famous investors were Peter Thiel and Elon Musk,
– the company did not raise that much money : 2M£ in Feb. 2011, £15M in Dec. 2011 / Feb. 2012, finally £25M in 2013 before the £400M acquisition by Google in Jan. 2014.

That’s it for the basic facts. More importantly, the lessons in the article my friends sent to me are:
– First, DeepMind combines crystal-clear strategic clarity with never-ending tactical flexibility. What comes across in the film is the company’s extraordinary willingness to experiment wildly and fail persistently.
– Second, DeepMind’s mission has helped it recruit some remarkable scientific talent, critical to its success. In a discussion after the movie, Hassabis explained that he had always resisted investor pressure to move to Silicon Valley and had been determined to remain in London. “The UK has always been very strong in science and innovation and has a rich history in computing,” he said. “We are trying to carry on in that tradition.” Hassabis reckoned that there was a lot of under-utilised academic talent in Europe, and elsewhere, that could be attracted to London. So it has proved.
– Third, what was essential for DeepMind’s success was its ability to scale rapidly. Back in 2010, few VCs were prepared to go anywhere near a startup with such extravagant ambitions and no business plan. Much of its initial capital came from US investors, including Peter Thiel and Elon Musk. The company also felt compelled to sell out to Google in 2014 to give it the capital, data and computing firepower necessary to stay at the leading-edge of AI. (The extra resources were essential for recruiting and retaining top talent, too).

Often not to say always the same lessons about risk taking and ambition…

PS: I have not watched the movie yet, so I may amend this post in the near future.

nVidia, the new giant

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nVidia has made the headlines recently as its stock value jumped by 25% to reach a valuation close to $1T ($1’000B) joining a small club of companies generally called the GAFA(M) or BigTech. I knew nVidia as just another Silicon Valley success story, a big one, but just one more. It belongs to my 800+ startup list and here is my typical cap. table.

Nvidia was founded in 1993 by Jen-Hsun “Jensen” Huang, Curtis Priem, and Chris Malachowsky and is headquartered in Santa Clara, California.


There would be so many little things to mention about how typical it is, but here are a few:
– The founders were young engineers (29, 33 and 33), one from Stanford University, the two others from solid even if lesser known schools. One is of Taiwenese origin. They worked in big tech companies before founding their startup, and they are still leading it. They had equal ownership at foundation.
– There was a typical support of venture capital, a total of $20M in 4 rounds between 1993 (the foundation) and 1997 (the IPO), followed by an IPO in 1999, less than 6 years after the incorporation. The VCs were Sequoia (which also funded Apple and Google), and Sutter Hill. The board included experts from Synopsys (its cofounder) and Avid.
– Employees owned at least 20% of the company through stock options (and maybe even 35%+ throug additional common shares).
– It went public at a $500M valuation, more than decent and was a leader in computer graphics chips until nVidia applied its technology to AI. Hence its current popularity.

Equal ownership of founders in startups ?

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Yesterday I had a short debate about Wozniak and Jobs initial ownership in Apple Computer. It is true that at the IPO Wozniak had much less ownership than Jobs, but this can be explained by the fact that he gave or sold at a low price shares to employees (whom he thought deserved it and Jobs did not). But at the origin, they had equal shares as the extract from the prospectus shows.

So I thought of having a look at my startup database (currently having 890 cap. tables) and I studied the numbers. Here they are:

So what are the lessons?

First majority of startup have between 1 and 3 founders, and 1 founder (contrarily to intuition maybe) is not so rare. Now there is a caveat: the history of a startup is never fully known. Apple had initially (and for 2 weeks) 3 founders! The third one was Ronald Wayne

Second, equal ownership is not the majority but it is not rare. Around 15-20%.

But this does not mean, one founder owns more than 50%. Of course yes with 2 founders. But for 3 founders, this happpens in 41% of the cases. When more than 3 founders, this is 31% of the cases. I did not check (yet) if geography or fields of activities have an impact…

Finally, if you read this blog, you should know that statistics do not say it all. Startups are a world of exceptions (and the statistics are seldom Gaussian but follow a power low, so beware of means of %). Therefore more anecdotally, but still important, here are some famous examples:

Famous startups – 2 founders with equal shares
Adobe
Akamai
Apple
Atlassian
Broadcom
Cisco
Genentech
Google
Intel
Netscape
Riverbed
Skype
Soitec
Spotify
Tivo
Yahoo
Zalando

Famous startups – 3 founders with equal shares
Airbnb
Checkpoint
Compaq
DoubleClick
Equinix
Marimba
nVidia
Palantir
Revolut
RPX
WeWork

Famous startups – 3+ founders with equal shares
AMD
Regulus
ROLM
Xiaomi

Famous startups – founders with non-equal shares
Cypress
DropBox
Etrade
Eventbrite
Facebook
Lyft
Microsoft
Mysql
Oracle
Pinterest
Salesforce
Sun Microsystems
Twitter
Uber

Figma, a new cap. table and there is much more to Dylan Field’s story

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Figma is the latest startup success story. Not an IPO, there are so few in 2022, but a $20B acquisition by Adobe. I did not have much data to build its cap. table so this is mostly tentative. Still it is interesting. So here it is. However there is much more to the story of its founders Dylan Field and Evan Wallace. Read below.

Not much to add to the numbers except the founders (including possibly some earnout shares) & investors stake, 20% & 50% respectively as well as the time it took for all this. A few months for seed, 10 years for an exit.

Photographer: David Paul Morris/Bloomberg

So let us have a look more specifically at Dylan Field. Again the typical even if rare school drop-out in his early twenties who is still the CEO 10 years later. His cofounder is a friend. The rest is history. Well not really. Read his Wikipedia page for more or this article from Business Insider.

First, Field received the $100k that Peter Thiel was offering to young students ready to drop out of school. Field’s parents were against the idea but Field dropped out of Brown University. I have always been intrigued with the idea of pushing people out of school. Will Field ever go back there?

Second, he found some VC money despite the fact that Field recalled that he experienced a “wake up call” when [a potential] investor turned down the chance to invest in Figma’s seed round and said, “I don’t think you know what you’re doing yet.”

Third, he remained as CEO despite his lack of business experience. At one point early into Figma’s existence, Field said he once faced the very real risk of an exodus of disaffected employees. He had to learn, quickly, how to be more open to feedback and to empower his teams, while also hiring experienced managers. “I didn’t know how to manage effectively,” he said. “I didn’t know the basics around how to have good judgment around who to hire. When we were 10 people, I was a year into management. Usually if you are a new manager, you manage a few people. I was trying to do this at the same time and get the product to market.” Apparently he survived a few crises and the VCs let him lead.

There is certainly much more to learn from this unique story, but it is enough here. One final point. I would love to know more about VC performance. I worked at Index in the early days so I learnt that a great success does not guarantee a fund performance. But here Index made apparently more than $2B and made at least a 400x multiple in the seed part of its investment in Figma. But information about VC performance is close to impossible to find…

More (interesting?) data about French unicorns

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A month ago, I published data about French startups. I had been surprised to discover that access to data about private companies was finally possible for free in my dear country. So I looked at some (famous) French unicorns with an interest in the shareholder structure and how much money they had raised overall, as well as in their seed and A rounds. You will find the detailed information in a pdf in the bottom of the post.

But before moving on to this analysis, I want to mention an excellent article on seed fundraising, which gives advice and quite rich information. It is in French though and is entitled La levée de fonds seed ou amorçage. So here are the results:

In this first table, I just had a look at their age and fund raising. To give simple rule of thumbs, about the ones which are still private, they are about 5 to 15 years old, they have raised about €200M, with seed rounds of €0.5M and A round of €2-3M. The market capitalization should be (by definition) above one billion euros, but apparently this is not always the case (let us say that the value of a private company is a very volatile metric!) and the ratio of this value to amount raised seems also to be 5 to 15…

I then looked at how much dilution the seed and A rounds correspond to as well as the age of the companies for these rounds. Again, not taking outliers into account, both the seed and A rounds seem to induce a 25% dilution, therefore, with rounds of €0.5M and €2-3M respectively, the value at seed is about €2M and at A round is €8-12M. Finally the startups are less than 1-2 years old at seed and less than 4 years old at A round.

The last table is about the shareholding or equity structure as well as some data about the founders. The founders keep 25-30% of their startups, investors have 60-65% whereas employees have 5-10%.

There are about two founders per startup, they are surprisingly often below 30 with a median and average age of 29 and sadly with not a single woman.

Equity List – French Unicorns

New data about academic technology transfer to startups

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Nathan Benaich is very unhappy with technology transfer in the UK and he is probably right to be. For many years I had noticed that British academic institutions often took more than a 25% ownership in a startup in exchange for a license of intellectual property, whereas the standard figure in the USA and continental Europe is more in the 5-10% range. He had published a very interesting article in May 2021, Rewriting the European spinout playbook where he was complaining about a lack of transparency and very frustrating processes.

He is now working on a new set of data provided by founders that he makes freely available on spinout.fyi. He is asking for help and any interested founder should provide a little if she can. I downloaded his data and provide here my own analysis although Nathan has his own here. You should read it. Here is a first set of tables:

If you do not like tables and even if you do, here are more figures:

And because I had done a similar research some years ago, posted here as How much Equity Universities take in Start-ups from IP Licensing?, I did the exercise of combining his and my data. This is a set of 190+ companies! You will see the equity ownership per domain and per region.

So what are the lessons? The UK is a clear outlier, but what is more striking is the volatility in the numbers. And why is that? Some professional claim each startup is different. I disagree. Strongly! The lack of transparency in the policies is the reason of the volatility. Founders seldom know how they will be treated. This is why I was so happy with EPFL publishing its policy. See my recent post Technology Transfer according to EPFL and Rules for Startups.

I really hope that Nathan Benaich’s effort will help in bringing a much needed transparency in these numbers!

Access to French startups data

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I should have known sooner about new rules on data about French startups. In the past, you had to pay on sites like societe.com or Euridile to get filing documents of private companies from the register of companies. This is the past! Now it is possible to access this data for free. And this is great news. So my favorite exercise which consists in building cap. tables of startups, which had become a habit for companies going public, for Swiss companies in certain cantons like Zurich or Basel, or for British companies thanks to Companies House is now possible in France with Pappers.

I obviously tried with some of the current famous private startups. I failed with Dataiku, probably because it moved to the USA, but could build some partial tables for Doctolib, Mirakl, Alan, Ledger and BlaBlaCar. It is far from perfect because you need to read many documents. I had to go through 68 ones for BlaBlaCar. I did not go into the details of stock options, granted or exercised. But I could get the info about the founders and the funding rounds. Here is a summary:

and here are the individual tables. QUite fascinating to see the recent trends in France through 5 examples:

The (Recent) Impact of Venture Capital on Startups

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I have regularly been puzzled with the (real) impact of venture capital on startups, their growth or even their success. A few days ago, I received an email from a friend with a very interesting table.

The measure of capital productivity is given by the ratio a/b where a is the startup revenue at the time of IPO and b is the amount of venture capital raised by the startup before going public. The 4 big tech companies are Apple, Microsoft, Amazon and Google, 4 companies founded before 2000. The ratio a/b is greater than 10. The recent VC or IPO deals give ratios below 1 and closer to 0.1.

So it was easy for me to look at my usual cap. tables (check here if you do not know what I talk about). I have now 880 companies and I sorted this a/b ratio over time. Here is the result:

I have 272 biotech startups and 361 in the Software and Internet fields (the others are hardware, semiconductor, energy, medtech companies mostly). I have the a/b ratio (which I call Sales to VC) by period of 5 years (the years of foundations of the startups). I also pu the PS ratio (the famous Market Capitalization to Sales or “Price to Sales” ratio). Indeed the ratio is “collapsing” from above 5 before the 90s to below 1 after 2000.

I have also separated biotech which is known to have startups going public with low revenue and the group of Software and Internet. The curves which follow are probably better illustrations. Quite striking!

I also looked at the profits (or losses) of the startups and computed the Profit to VC amount ratio. Here it is:

Biotech is different as companies were rarely profitable when going public and the ratio is quite stable since 1990. But overall, companies were profitable at IPO before 2000 (and sometimes highly profitable, so that I could not find a good axis scale for my figure). They are losing money since 2005 and apparently losing more and more.

All this is no real surprise. Mallaby in his recent book The Power Law has described the new trends in venture capital. Funds like Softbank Vision or Tiger Global are pouring tons of money in startups which try to capture market dominance, whatever the cost. So the capital productivity is decreasing at IPO with the hope of huge gains in the future. A very, very risky bet…

PS (dated April 22, 2022) : I was asked a question about startups in the energy / greentech field. This is indeed interesting. Couple of comments before providing an answer from my data. Greentech has never been a stable or profitable segment. Kleiner Perkins or Khosla Ventures, early entrants in the field, seem to have suffered a lot. In addition I have only 21 companies in my DB. You are right, it is stable but from the low range, with low sales to VC ratios and negative profits…

La question était : On a different note you have data only on Energy/green tech? what would you expect to see? I was wondering if for capex intensive businesses the trend is more weak as they already needed to raise a lot of capital.