The round extension is the most popular fundraising round today. You won’t find statistics detailing their rise in PitchBook or Crunchbase, but “reopening the last round” or “raising a round extension” precede pitches Startupland today.
How does an extension impact a company’s cap table on average?
Round dilution from VC dollars has been declining for the past decade. These figures exclude employee stock option (ESOP) dilution.
In the last 12 years, mean seed round dilution has dropped from 25% to 12.5%. Series A has dropped from 30% to 20%; Series B from 22.5% to 12%; and Series C from 18% to 11%. Across financing rounds, dilution from capital has fallen by 30-50% in that decade.
Cumulative Dilution
| Founded | 2010 | 2015 | 2022 |
|---|---|---|---|
| Seed | 25% | 18% | 12% |
| Series A | 30% | 27% | 20% |
| Series B | 22% | 20% | 12% |
| Series C | 18% | 18% | 12% |
| Total | 66% | 61% | 45% |
Here’s a table of cumulative dilution for a hypothetical startup raising 4 rounds in one year. It’s not the implied ownership of preferred shareholders at the end of these raises. The calculation doesn’t include ESOP expansion, full investor participation in pro-rata, and other changes to the cap table.
Today, founders sell less of their companies to achieve fundraising milestones today than at any in the last decade – a 30% drop in 12 years.
A round extension that sells another 15% of the company leaves a modern founding team with more ownership than its older brothers founded five or ten years ago.