Annual Equity Report 2019

Published date: December 1, 2019

Overview

What we anecdotally feared is validated by data. The equity gap is larger than the salary gap.

In 2019, Carta, an ownership management platform for over 800,000 equity holders, and investment collective #ANGELS, collaborated to analyze the equity ownership of venture-backed companies by gender. The numbers from this study have now been cited in over 70 publications.

Our goal is to empower more women to get a seat on the [cap] table.

We’ve seen an outpouring of support from our community of partners, founders, investors, and employees to continue to drive this discussion through data. This year we’ve developed an initiative to continue these efforts—Table Stakes.

Our goal is to empower more women to get a seat at the [cap] table and make sure they receive fair equity when they get there. This year we dove deeper into our data to uncover what’s behind the gap.

What’s on the [cap] tables?

We analyzed a subset of Carta’s overall cap table data, which included over 320K employees, nearly 10K companies, and over 25K founders. Our data excludes certain equity awards (certificates, convertible notes, and warrants) which are held primarily by venture capitalists.

The equity gap isn’t isolated to women at venture-backed companies. We are still very interested and committed to analyzing the gap for other underrepresented minorities. Carta’s data set and other publicly available datasets don’t allow for this currently.

Data summary

Employee equity gap

Distribution of wealth: In aggregate, founders hold more than double (2.2X) the total amount of equity that employees own.

Team breakdown: Engineering teams have the highest average equity grant, and women represent less than 20% of engineering teams.

C-level breakdown: Only 1 in 8 CEOs is a woman, and CEOs get more than double the equity of the next highest compensated executive.

Cap table millionaires: Only 20% of cap table millionaires are women, and of hundred millionaires just 12% are women.

Cents on the dollar: Women employees own just 49 cents in equity for every dollar men own.

Founder equity gap

Distribution of wealth: Women founders hold 5% of total founder and employee equity in our study; men founders hold 64%.

Cents on the dollar: Women founders own just 48 cents in equity for every dollar men founders own.

Overall equity gap

Distribution of wealth: 96% of equity value is held by the top 20% wealthiest equity holders. Of the wealthiest owners, only 9% are women.

Cents on the dollar: Women own just 11% of founder and employee equity, and hold 26 cents in equity for every dollar men own.

Distribution of ownership

When you compare equity data to overall income data, the disparity is more pronounced. In the United States, 20% of income earners hold 77% of the wealth. Based on Carta’s data, we found:

• 20% of equity holders (founders and employees) own 96% of total equity value.
• Of the 20% wealthiest equity holders, less than 1 in 10 are women.
• 7.5% of all individual equity holders are founders, and they hold 69% of the equity value.

Cents on the dollar

Compensation gaps are typically quantified using cents on the dollar, so we use the same ratio to describe the gender equity gap. For example, women are paid between 78 to 82 cents on the dollar compared to men depending on the source. Our data answers the question, for every dollar a man holds in equity value, how much does a woman own?

Employee cents on the dollar

One in three employees on Carta cap tables is a woman. And while 34% of employees are women, they only hold 20% of the equity wealth.

It’s not just that there are fewer women—it’s that they’re in roles that get less equity on average.

• Women employees own just 49 cents in equity for every dollar men own.
• Women employees make up 34% of employees in our study, but hold only 20% of employee equity wealth.
• Women employees make up 31% of everyone in our study (founders and employees), but hold 6% of overall wealth.

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Founder cents on the dollar

Though we know women’s representation on founding teams is increasing, still very few individuals on cap tables are women founders. When you combine founders and employees, women founders represent less than 1% of all individuals on Carta cap tables. And women founders hold less than 5% of the overall equity.

When you break this down for just founders, women founders represent 13% of all founders, and they hold 7% of founder equity value. This means that women founders own just 48 cents on the dollar in equity for every dollar men founders own.

Overall cents on the dollar

When we combine founder and employee data, the overall equity gap measured by cents on the dollar is lower than both the founder equity gap and employee equity gap. While this math might seem counterintuitive, it is due to the extreme concentration of wealth among founders.

• Combined, women founders and employees own just 26 cents in equity for every dollar men own.
• Women make up 32% of individuals in our study, but hold only 11% of the total equity wealth.

Cap table millionaires

Private markets are illiquid compared to public markets. We believe that in the near future, successful companies will regularly offer liquidity events (like tender offers). When liquidity happens, who will get rewarded? To answer this, we looked into what we’ve termed “cap table millionaires.”

Our cap table millionaire data provides a different lens on the equity gap. If all venture-backed companies with cap tables on Carta provided employee liquidity, how many people would earn more than a million dollars from their equity stakes? What percentage of these potential millionaires are women?

We found that only 20% of cap table millionaires are women.

Team and role breakdown

To more deeply understand why the equity gap exists, we used our data to determine if women in the same roles as men are compensated with less equity (all else being equal—start date, option type, strike price, etc).

Our current dataset indicates that employees in the same role are compensated with equal equity. The study shows that the gap exists because women aren’t in the right roles at the right time—the roles with outsized equity.

For most teams, % of women dramatically declines with seniority

• Engineering has the lowest representation of women compared to the other teams in our study. Women engineers are less than 20% of engineers in our study, at every level.

Fair equity is table stakes

The individuals on cap tables today are the founders, venture capitalists, and limited partners of tomorrow. We must close the gap now.

Here’s how we believe you can help, no matter who you are:

Employees

• Learn about equity and negotiate. Rarely will a company decline your offer altogether because you negotiate.

Managers

• Hire women and underrepresented minorities (URMs). The cards are stacked against them, and it’s time we turn the tables.

Founders

• Seek co-founders and early employees outside of your community. Diverse perspectives help.

Investors

• Join or start firms that care about diversity and inclusion.

Methodology

Carta helps over 13,000 companies and 800,000 security holders manage equity. This study uses a sample of Carta’s founder and employee cap table data, aggregated and anonymized.

Valuing equity

To calculate the value of these options, we used two methods: fair market value (FMV) and 409A valuation, to estimate the number of cap table millionaires.