May 29, 2018

"Founder friendly" era in Silicon Valley is creating stars

Axios

A crowd of people at a Google conference — Attendees look on at Google's I/O developer conference. Photo: Justin Sullivan/Getty Images

"Silicon Valley financiers are losing leverage to star entrepreneurs ... Founders of highflying startups are increasingly wresting control of their companies from venture-capital backers and extracting huge pay packages tied to going public," The Wall Street Journal's Rolfe Winkler and Maureen Farrell write (subscription).

Why it matters: "VCs say empowering founders — through special voting shares, governance rights and other tools — frees them to follow ambitious long-term strategies once their companies go public without having to worry that poor performance will bring pressure from activist investors."

The state of play: "Venture capitalists had long called the shots in startup boardrooms and continue to be the primary backers of private companies. But in recent years, they have had to compete against new classes of investors including mutual funds, sovereign-wealth funds and now Japan’s SoftBank Group Corp., which has a $92 billion fund investing in startups."
The data: "Last year, 67% of U.S. venture-backed tech companies that staged IPOs had supervoting shares for insiders ... The proportion of nontech U.S. venture-backed IPOs with supervoting shares stood at 10% to 15% every year ... 72% of founders of U.S. tech startups valued over $1 billion that had IPOs over the past 24 months have supervoting shares."

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"Founder friendly" era in Silicon Valley is creating stars

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