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- ♞ Trends in VC Industry: Founding Teams
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Lately, I’ve had lots of founders complaining about perceived changes in the fundraising model and method, so today I wanted to highlight some of these trends so that you don’t feel caught off-guard when talking to investors and seeing a market that is substantially different from what you may have seen in the past or expected to see based on other people’s stories or their fundraising experiences. This issue will focus specifically on founding teams.
Solo-founders are not the exception. In 2015, only 17% of startups had a single founder, which was behind two-founder teams (32%) and three-founder teams (25%). Today, this is no longer the case; in 2024, 35% of startups had a single founder, behind only two founder teams (37%). Solo founders are now the norm and will likely be the most common type of company in 2025.
Despite this VCs still back multifounder teams. In 2015, VC distribution was almost identically aligned with the makeup of teams: 15% went to solo-founder companies, 32% to two-founder companies and 26% to three-founder companies. Today, while the makeup of teams has changed the distribution of capital has remained the same, with 17% going to solo-founder companies, 34% to two-founder companies and 25% to three-founder companies
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Uneven equity distribution is the norm. The normal split for a two-person team is 55/45. For a three-person team, it is 47/33/16. This is important to know, as many founders feel that investors will not back teams with uneven distribution. I’ve found the opposite to be true. Investors generally want the founder most vital to the longterm success of the company to have outsized equity so that they continue to have a strong financial incentive to stay with the company as it matures.
Split equity is becoming more common. Despite equity distribution not being the norm it is becoming more common. In 2015, only 31% of 2 founder teams and 12% of three-founder teams had an even split. In 2024, that jumped to 46% of 2-founder teams and 27% of three-founder teams.
Many co-founders don’t last. On average, in a two-founder team, 25% of the time, one co-founder will leave by year 4, and 50% of the time, one will leave by year 10. Overall, it means that if you do raise, you need to start putting contingency plans in place.
Have you witnessed these trends? |
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Onwards and Upwards,
