Percentage of Unicorns with Founder CEOs, How to Size ESOP, Benchmarking SaaS Growth, NRR & More
Digesting Insights From the Data
👋 Hi, I’m Andre and welcome to my weekly newsletter, Data-driven VC. Every Tuesday, I publish “Insights” to digest the most relevant startup research & reports, and every Thursday, I publish “Essays” that cover hands-on insights about data-driven innovation & AI in VC. Follow along to understand how startup investing becomes more data-driven, why it matters, and what it means for you.
Brought to you by Affinity - The VC’s guide to fundraising in 2024 (and beyond)
The headlines indicate it’s a tough time to fundraise—but Affinity survey data also revealed it’s a top priority for almost a third of firms. To succeed in this market you need a solid strategy and a way to communicate it to LPs. Affinity’s guide features advice from more than five top firms on how to achieve these objectives and your fundraising goals.
Employee Option Pool Size: Founder-VC Negotiations
When raising a seed round, founders often face pressure from VCs to set aside a substantial portion of equity for the employee option pool. While a larger pool can reduce VC dilution, data from Carta suggests that a 20% reserve is generally excessive for early-stage companies. Here's what the numbers reveal:
Median Option Pool Size: For seed-stage valuations ($1M to $10M), the median pool size is 12.9%, with a range from 8.9% (25th percentile) to 18.5% (75th percentile).
Valuation Tiers and Pool Size: As valuations increase, the median pool size slightly rises, peaking at 19.6% for valuations between $1B and $10B.
Strategic Allocation: Founders are advised to set aside equity that meets hiring needs for the next two years, with room for adjustments in future funding rounds.
✈️ KEY TAKEAWAYS
By aligning the option pool size with actual hiring plans and industry benchmarks, founders can provide competitive equity grants to employees while minimizing early-stage dilution. This approach supports sustainable growth and maintains founder control during critical early phases.
SaaS Growth Continues to Flatten, but not for All Segments!
ChartMogul's latest SaaS growth data for May reveals a mixed bag: while overall growth mirrored April's sluggish pace, specific segments experienced notable improvements. Here are the key insights:
Top Performers: Companies with ARPA over $1000 saw the highest growth rate since early 2023, accelerating by 15 percentage points to 44%. This segment's growth is prone to fluctuations, with similar trends observed in early 2024.
Moderate Gains: Companies in the $300K-1M ARR and $250-500 ARPA ranges recorded a 3pp improvement. The $300K-1M ARR segment hit a 30% growth rate, the highest in 2024, while the $250-500 ARPA range reached 24%, levels not seen since late 2023.
Struggles Persist: Growth rates hit a four-year low for companies with $500-1000 ARPA and less than $25 ARPA, dropping to 24% and 20% respectively. Companies with $15-30M ARR saw a 2pp decrease, ending at 20%.
✈️ KEY TAKEAWAYS
Despite overall slow growth, certain segments demonstrate resilience, highlighting the importance of targeted growth strategies. SaaS companies focus on retention.
Understanding Valuation Multiples
Valuation multiples are crucial for determining a company's worth. They vary significantly based on growth stage, industry, and deal size. Understanding these dynamics is essential for entrepreneurs planning fundraising or exits. By aligning growth strategies with industry benchmarks, founders can attract the right investors and maximize valuations. Dealroom published a new guide to help you make data-driven decisions: