The Relationship Between Valuations and CEO Composition May Surprise You
Valuations may be starting to fall, but founders need not worry yet. After all, valuations aren’t everything.
Over the past two years, the value of private companies has skyrocketed, but that didn’t necessarily mean founders were making more money. In fact, sometimes they earn less.
Data from J. Thelander Consulting, collected from more than 2,000 private companies, shows that over the past three years, the median total amount of cash CEOs have actually taken home fall when a company’s valuation has dropped from $90 million to $130 million (total cash is the combination of base salary and bonus). Meanwhile, these CEOs have also given up on greater stakes in the company in 2021 and 2022 as their company valuations increase.
Here is an overview:
It’s not a perfect rule: total cash largely recovered when valuations rose above $200 million. But the data serves as an important reminder, especially now – when valuations are at the start of a decline – that valuations don’t necessarily translate into financial success.
“As the market shows, valuations are subjective and not a reliable barometer for determining compensation,” Jody Thelander, CEO and founder of J.Thelander Consulting, told me in an email.
That being said, the financing rounds do tend to be a strong indicator of a pay rise – and the checks VCs have written have gotten smaller.
CEOs and senior executives always get a financial boost after companies get more funding from venture capitalists. “In all cases, the total cash flow of founders and non-founders increases as funding increases,” says Thelander.
A fall in valuations might not have a drastic impact on CEO pay. A significant drop in funding could very well do that.
In general, pay has increased for CEOs and top performers since 2020 as companies struggled to retain talent and used everything from base pay, equity and bonuses to retain them, according to Thelander. .
Will this continue? It’s hard to tell when companies are laying off en masse. At the same time, the unemployed do not seem to have much difficulty finding a new job.
A programming note… On Labor Day, you won’t get a term sheet in your inbox on Monday. Take advantage of the long weekend and see you in a few days.
Jackson Fordyce curated the deals section of today’s newsletter.
– Alloya New York-based identity decision platform for banks and fintechs, raised an additional $52 million in funding. Lightspeed Venture Partners and Future Growth led the round and were joined by investors, including Canapi Ventures, Bessemer Venture Partners, Passionate companiesand Felicis Ventures.
– A signala San Mateo, Calif.-based customer engagement platform raised $50 million in Series C funding. BAM elevation led the round and was joined by investors including Agile partners, SignalFireand Zach Coelius.
– EVIDENCEa Los Angeles-based NFT-based podcast and event platform, raised $50 million in Series A funding. A16z encryption led the round and was joined by investors including seven seven six, real companies, Collaboration+Currency, CAD Flamingo, Angel S.V.and Vayner Fund.
– Fairmarkita Boston-based automated procurement platform, raised $35.6 million in Series C funding. OMERS Growth Stocks led the round and was joined by investors including GGV Capital, Insight Partners, HighlandXand ServiceNow.
– Landaa New York-based real estate investment firm, raised $25 million in Series A funding. NFX, 83Northand Viola Ventures invested in the round.
– Apricitya London-based virtual fertility clinic, raised €17 million ($16.91 million) in Series B funding. MTIP led the round and was joined by Iris Ventures.
– Learnsofta San Diego-based learning and talent platform, raised $16.7M in Series A funding led by Partners from elsewhere.
– FX Hedge Poola London and New York-based peer-to-peer matching platform for foreign exchange transactions, raised $8m in Series A funding. iVenture Partners Information led the round and was joined by investors including Fidelity International Strategic Businesses and NAdventures.
– beauty adwoaa Dallas-based beauty brand, raised $4 million from Pendulum.
– Haru Investa Singapore-based digital asset management platform, raised $4 million in funding under the leadership of Cocone Corporation’s Executive Chairman Chun Yang Hyun.
– PsycAppsa London-based mental health video game developer, has raised £1.5 ($1.73m) in seed funding from Morningside Ventures.
– CIVC Partners acquired a majority stake in OTR transportation, a Chicago-based freight broker. Financial terms were not disclosed.
– Fortis Solutions Groupa fund holding company managed by Harvest Partnersacquired Digital Dogma Corp., a label, shrink sleeve, and digital packaging manufacturer based in Santa Fe Springs, California. Financial terms were not disclosed.
– A subsidiary of HIG Capital acquired CPS Building Services, a mechanical and electrical service provider based in Cambridgeshire, UK. Financial terms were not disclosed.
– PayrHealthsupported by Osceola Capitalacquired Supero Healthcare Solutions, an Austin-based provider registration and accreditation company. Financial terms were not disclosed.
– Funds advised by SK Capital Partners and Edgewater Capital Partners agreed to acquire the scintillation and photonic crystal businesses of Saint Gobain, a Hiram, Ohio-based crystal supplier for radiation detection applications. Financial terms were not disclosed.
– Security technical servicesa portfolio company of LLCPacquired CEPA operations, an Ontario, California-based provider of regulatory certification services for controlled-environment equipment for pharmaceutical and healthcare facilities. Financial terms were not disclosed.
– Grill acquired a majority stake in Magneto & Diesel Holdingsa distributor and remanufacturer of diesel engine replacement parts and components based in Humble, Texas, from Warren Equity Partners. Financial terms were not disclosed.
– Novo Nordisk agreed to acquire Form Therapeutica rare blood disorder and sickle cell disease treatment company based in Watertown, Mass., for approximately $1.1 billion.
– Map acquired Capdesk, a London-based equity management platform. Financial terms were not disclosed.
– HTEC acquired Mistral Technologies, a product development software company based in Sarajevo, Bosnia. Financial terms were not disclosed.
– instagram acquired Insight, a Palo Alto-based pricing and promotions platform for CPG brands and retailers. Financial terms were not disclosed.
– Measurable acquired WegoWise, a Santa Barbara, CA-based software platform for utility data automation and residential real estate. Financial terms were not disclosed.
– smart sheet acquired Outfit, a Brisbane-based brand management, template building and creative automation platform. Financial terms were not disclosed.
FUNDS + FUNDS OF FUNDS
– Venture Chantsa San Francisco-based venture fund, has raised $50 million for a third fund focused on pre-seed and seed investments in climate, TechBio, aerospace and energy startups computer science.
–AE Industry Partnersa Boca Raton, Florida-based private equity firm promoted Tyler Rowe in the main and Austen Dixon, Graham Kantorand Eugene Kim to the vice president.
– CenterOak Partnersa Dallas-based private equity firm, has hired Marc Langer as general manager. He used to be with Heartwood Partners.
– Founders Funda San Francisco-based venture capital firm, has hired Sam Blonde as a partner. He used to be with Brexit.
– GICa London-based alternative asset manager, has hired Andrea Serra as Head of Europe for ICG Strategic Equity. She used to be with black stone.