2020: A Study Analyzing Equity Distribution By Gender, Race & Ethnicity, & Geography
Owning equity in a successful company can make a material impact on one’s financial well-being and ability to grow wealth.
Owning equity in a successful company can make a material impact on one’s financial well-being and ability to grow wealth.
Owning equity in a successful company can make a material impact on one’s financial well-being and ability to grow wealth. Historically, equity ownership has been concentrated in the hands of the few, and those few tend to have similar demographic backgrounds. We believe that such concentration is one of the primary factors fueling the exponential growth in the wealth gap.
In response to this concentration, the #ANGELS called for a consistent measurement of diversity in equity ownership in 2018. With over one million equity owners and $1 trillion USD in equity value, Carta is the only data provider that can consistently report on equity ownership at scale. Since 2018, we have partnered with the #ANGELS to measure annually through the Table Stakes report.
To create the most robust dataset possible, Carta has added the ability to self report gender, race & ethnicity, and parental status directly in the application itself. This year, thanks to our users who voluntarily and confidentially self-reported demographic data, we have enough data to analyze equity distribution by race and ethnicity in addition to gender.
What we know is that there are four categories of corporate stakeholders that earn the lion’s share of the equity:
Our data show that women and People of Color are underrepresented in each one of these categories. Sadly, there has not been meaningful change in representation since 2018 when we began this study. But what is not measured cannot be managed, so Carta is committed to continuing to do this analysis and provide the resulting information publicly every year.
To this end, we recognize that identity intersects across gender, race & ethnicity, and therefore our findings may not fully represent the experiences of People of Color and non-binary individuals. As we continue to receive more self-reported data, we will work to incorporate intersectionality into our analysis.
The work to move these numbers will take the entire ecosystem. Included in this report are companies dedicated to helping the ecosystem move these numbers, whether it be through compensation benchmarking, job training and placement, or creating more inclusive environments.
As is often the case, education is another barrier to change. As one step toward change, Carta has developed an equity education program and is committed to providing that training to 100,000 employees across the country. Learn more about how you can participate for yourself or your organization at https://carta.com/resources/equity-essentials/.
Carta’s data for 2020 show there has been no substantive increase in overall representation in ownership for women. For every dollar in equity that men collectively own, women own just 47 cents.
While representation of women has increased since 2019, an encouraging leading indicator, we have not yet seen that translate to commensurate ownership. While women represent 35% of equity holders, they only own 23% of the equity.
Our data show that women employees own less equity largely because they lack representation in the positions that have the highest equity ownership, including senior executives, early-stage employees, and engineering roles. Below will examine each in turn.
Since 2016, the percentage of women founders in the startup ecosystem has stayed relatively constant, never surpassing 20%.
Our data show that certain sectors attract more women founders than others. Specifically, we see more women starting companies in healthcare, ecommerce, and food products as well as a growing number of women starting companies in consumer electronics.
Importantly, outside of high valuation industries like healthcare, where the percentage of women founders is higher than average, we do not see a significant difference in post-money valuation of the industries in which women are founding companies. This leads us to believe that the need is simply to fund more women founders, regardless of industry.
Senior executive positions often earn large equity grants. An unfortunate and pernicious side effect of the glass ceiling for women is the lack of equity ownership and subsequent lack of wealth creation. Our data show that women are underrepresented in all roles leveled Director and above.
Companies are increasing representation in the C-Suite over time, reaching almost 40% representation in Series E companies.
Our data show that for most roles, women are hired consistently across departments of a company, with the notable exception of engineers. Engineering and Operations both see a higher proportion of women hired into those departments at Series E companies. Given the disproportionate value of early stage employee equity grants and the higher level of equity awarded to engineers generally, this difference is a contributing factor in the equity gap.
The 2020 data indicate that companies have success hiring gender diverse teams while growth rates remain below 200% year over year. When growth rates hit 200% or higher, however, the disparity in hiring becomes most pronounced. Notably, this effect is true for engineering but not for roles like customer success.
People of Color make up a very small proportion of employee stakeholders in this dataset, consistent with reports showing an overall lack of racial diversity in the startup ecosystem. Notably, of Black and Hispanic/Latinx employees surveyed, very few hold a significant amount of equity wealth. We looked to our data to help answer the question of why certain groups were holding a disproportionately low percentage of total equity as compared to their representation in the employee stakeholder ecosystem.
The majority of Black employees sit in non-technical roles such as customer success, sales, and operations. Comparatively, the majority of Asian and South Asian employees sit in engineering or product roles.
Representation by departments contributes to the difference in equity ownership by race and ethnicity. Our data show that technical roles, like engineering, often see the highest equity grants at every level of seniority.
Equity grant size typically grows with seniority. According to our data, more White and South Asian employees sit in VP or higher roles, while comparatively Black and Hispanic/Latinx employees are underrepresented in these levels.
Additionally, equity value can also be associated with the funding stage an employee joins a company. According to our data, Black employees are more likely to join companies at later stages of growth, when compared to other People of Color. More specifically, for example, about 21% of Black employees joined at the series A round, as opposed to 30% of South Asian employees.
Equity ownership has historically been concentrated in Silicon Valley, where talent pools and recruiting channels are both hyper-localized. COVID-19 and the shift to increased remote work create a potential opportunity to diversify talent location across the United States, and in doing so, move more equity ownership outside of Silicon Valley and other urban tech centers.
One reason the wealth gap has grown so exponentially is that some are on the equity stack while others are primarily on the debt stack. Salary is a debt product with bi-monthly coupons, so grows linearly. But equity grows exponentially.
Working at a successful private company opens a window to equity ownership and wealth creation for all employees that own a piece of that company. In 2020 there are 1.13 million equity holders on Carta, owning a combined $1.15 trillion in equity value, up from more 930,000 equity holders owning a combined $595 billion in equity value in 2019. We will continue to track these numbers in an effort to create more owners and distribute more wealth through equity.
Learn more about equity
Companies driving change in the ecosystem
409A VALUATION: An independent appraisal that determines the FMV of a private company’s common stock. It’s usually used to figure out how much employees should pay to exercise (purchase) their stock options. Learn more.
CAP TABLE: A list of all the securities a company has issued and who owns them. Learn more.
COMMON STOCK: Stock commonly reserved for employees. Learn more.
EQUITY: The value of stock issued by a company.
EMPLOYEE SHAREHOLDER BILL OF RIGHTS: The most important thing companies need to get right for employees is equity and liquidity. At Carta, we believe that all full-time employee shareholders at venture-backed companies deserve. Learn more.
EXIT: When a private company does something that radically changes the ownership structure of the company, such as going public or getting acquired.
FMV (FAIR MARKET VALUE): What one share of a private company’s common stock would be worth on the open market. Learn more.
LIQUIDITY: When an asset (such as shares of stock) can be converted into cash. Learn more.
OPTIONS: The right to buy shares of company stock at a specific price. Learn more.
PREFERRED STOCK: Stock commonly reserved for investors. Learn more.
RSU (RESTRICTED STOCK UNIT): A promise from a company to give shares of company stock (or the cash equivalent) on a future date if certain restrictions are met. Later-stage and public companies often offer employees RSUs instead of stock options. Learn more.
SECURITIES: Financial assets that usually represent ownership in a company and hold monetary value. Securities include stock, convertible notes, warrants, and equity grants.
SHAREHOLDER/SECURITY HOLDER: Anyone who owns shares of company stock/securities in a company.
STOCK APPRECIATION RIGHTS: A bonus companies can give employees. Unlike stock options, employees don’t have to pay anything to receive this benefit—they simply receive the sum of the appreciation of company stock over a set period of time.
STRIKE PRICE: The set price at which someone can purchase their stock options. It’s usually the FMV of the company’s common stock when the option grant was issued. Learn more.
TENDER OFFER: A company-sponsored liquidity event that typically allows multiple sellers to sell their shares either to an investor or back to the company. Learn more.
The Table Stakes analysis uses equity data from 520,000 employee stakeholders on Carta, representing over $32.3 billion in equity. Our company founder analysis represents 24,850 founders managing their cap tables on Carta.
|Founders||Total||With an Industry|
This year, we used our growing dataset of employee level / department mappings and compensation packages to dig deeper into industry trends. Below is the breakdown of employee sample sizes per level / department. All role information in Carta is self-reported. We did not include roles that we could not easily categorize in a department (such as “team lead” or “analyst”).
|Customer Success||Engineering||Human Resources||Marketing||Operations||Product||Sales||Other|
Market value for the equity grants is calculated using the difference of the latest fair market value of an option (as of the latest valuation) and the strike price, multiplying by the quantity of shares granted. We used 409A valuation, rather than investor valuation, since 409A valuations are required to be updated in Carta regularly (every year, or every time a company has a material event). We also recognize that prices offered during a liquidity event are typically not the same as FMV, therefore we use percent fully diluted at the time of option issuance as frequently as possible.
This year, in support of racial and gender equality, Carta offered U.S.-based employee stakeholders an opt-in method for sharing demographic information for the purposes of aggregate, anonymized equity compensation analysis.
|Race/Ethnicity||Sample Size||Total Market Value|
|Hispanic / Latinx||1,489||88,945,267|
|I Decline to Identify||676||66,231,995|
|Middle Eastern / Arab||153||17,750,594|
|Native / Indigenous||38||1,111,270|
When available, Carta uses an employee’s self-identified gender (from the demographics survey) in this analysis. However, given the sparseness of the survey dataset, we categorized unknown genders by comparing the stakeholder’s first name to aggregate name data from both the U.S. Social Security Administration and Gender API to yield a more complete dataset. Using a taxonomy does have its shortcomings and proper gender assignment will continue to be an active area of improvement for future reports.
|Gender||Sample Size||Total Market Value|
|Self-Identified Non Binary||142||5,071,246|
Cents on the dollar = mean wealth of women divided by mean wealth of men.
Mean wealth = total current equity value, based on 409A valuation, divided by the total number of security holders.