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Welcome to our monthly wrap-up episode where we cover February’s most relevant content at the intersection of startups, VC, data & AI.
We read it all so you don’t need to - here we go👇
INTERESTING RESEARCH & REPORTS📈
How Big Should Your Seed-Stage Employee Option Pool Be?
New data from Carta shows that the median employee option pool at the seed stage is significantly smaller than what some VCs may suggest. Here’s what you should know to balance employee fairness with founder equity preservation.
Option Pool Reality: Data from over 15,000 startups between 2020–2024 shows the median seed-stage employee pool is 11.8%, with the 75th percentile at 16.2%.
Why VCs Push Bigger Pools: Larger pools pre-round reduce their dilution but may over-allocate equity founders can later reclaim. On average, startups only use 60–70% of the pool before their next fundraising.
Planning for Growth: Seed-stage startups have slowed hiring compared to past years. Instead of overcommitting equity upfront, reserve enough for two years of hiring with the flexibility to replenish later.
✈️ KEY TAKEAWAYS
Founders should push back against unnecessarily large option pools in early rounds, leveraging data to preserve their equity while still supporting employee ownership.
Surprising Exit Math for Bootstrapped vs. VC-Backed Startups
Dirk Sahlmer breaks down the financial outcomes of bootstrapped vs. VC-backed SaaS exits, showing that the gap in take-home cash is smaller than many assume.
Exit Multiples and Valuations: Bootstrapped startups typically sell at a 4.1x revenue multiple, while VC-backed startups command a premium 10x multiple.
Dilution and Liquidation Preferences: VC-backed founders experience significant dilution—by Series C, they may own just 29%. Liquidation preferences also impact their final payout, especially in smaller exits.
Higher ARR, Higher Stakes: For VC-backed founders to see meaningful returns, they often need an ARR of at least $30M before an exit becomes financially rewarding.
✈️ KEY TAKEAWAYS
Big exit numbers don’t always mean big take-home pay—bootstrapping can lead to a similar financial outcome without heavy dilution.
