Today’s VentureWire includes an important piece by Russell Garland summarizing insights from the Dow Jones Venture Capital Deal Terms Report, a survey of startup financing terms from the July 2006 through June 2007 year. Interestingly, I noted in a September post that a certain number of bootstrapping entrepreneurs receive liquidity via fundraising. The Dow Jones report indicates that this happened in 16% of first round deals during the survey period:
“The report also found that founders and prior investors usually did not sell shares to investors in the latest round, despite a longer wait for liquidity. But with more founders bootstrapping companies before seeking an initial venture financing, the rate was highest in first rounds with 16% of those deals affording founders the opportunity to sell some stock.”
I’m actually a bit surprised by the 16% figure. It strikes me as high given the “hunger dilution” that liquidity delivers. I’d be curious to know what percentage of the cashing-in founders held, and were maintaining, the CEO role.
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Photo credit: Numbers 16, originally uploaded by Trevor Blake
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