Dear SaaStr: If a Startup Sells for $100 Million, How Much Can The Founder Expect to Make?
and Will Palantir Remain a Strong Company in the Future?
Dear SaaStr: If a company is sold for $100 million, how much would the CEO/founder(s) be expected to make, on average? Let’s say the company had 50 employees.
Let's try to answer this question, for a typical SaaS company at least.
If they have 50 employees, as you state, and are venture-backed, we can use the rule of $150,000-$200,000 in ARR per employee in SaaS / business web services.
>> Ok, so this company is probably doing $7-$10m in ARR, probably $7m if they are venture-backed today. I can pretty much guarantee you this is right, see How to Figure Out Your Competitors’ Revenues in About 70 Seconds
I would say today, in this SaaS market, they have likely raised $20m minimum venture capital to get to $7-$10m in ARR, perhaps more.
We can also assume they are reasonably hot (otherwise, why would they have been acquired), so they got a pretty strong Series B valuation in today's market.
So how does that play out?
Scenario A: Assuming they are venture-backed, but no seed round ... a best case for a SaaS company is probably:
Series A - $4m - sold 30% of company.
Series B - $15m - sold 20% of company
Pool - 15% used up
Founders - 35% left.
I do know of a handful of SaaS companies that have done better than this (i.e., same capital, less dilution), especially in the B round, but this is a fair look at a medium-hot SaaS company.
Scenario B: Let's assume they are still pretty hot, but did a seed round, and didn't quite get the deal the folka above did:
Seed - $1.5m - sold 15% of company, net after dilution
Series A - $4m, sold 30% of company
Series B - $15m, sold 25% of company
Pool - 15% used up
Founders - 15% left.
All these scenarios assume no outside CEO is brought in. If so, that CEO + his/her h will take up another 10% total.
Summary for Venture-Backed SaaS Company:
So for a super hot SaaS company, I'd say 40% left for founders.
For a pretty darn hot SaaS company, I'd say 35% left for founders.
For a warm SaaS company ... 15% left for founders.
A related post here:
Dear SaaStr: Do you think Palantir will be a strong company in the near future?
Palantir will be a strong company for at least a decade.
Why?
Math.
Palantir is at $2 Billion in ARR (revenue run rate)
It’s growing 31%
Its NRR is 124%. So even if it doesn’t close a new customer, it will still grow 34%.
Its average big customer pays $40,000,000 a year and never churns.
It’s cash flow positive.
Palantir isn’t perfect, and others are growing even faster. But this sort of engine is tough to kill.
More here:
