88% of VC-backed founders get nothing at exit, and the top 1% take 79% of the value, new study finds
What's the finding? A working paper by Eduardo Azevedo and Kent Smetters (Wharton) and Florian Scheuer and Min Yang (University of Zurich) estimates that roughly 88% of US venture-backed founders end up with zero exit value, while the top 1% of founders account for 79% of all exit value and the top 2% for 89%. The paper went viral on X on 22 October after The Economist's senior economics writer Callum Williams highlighted it; its latest version is dated July 2026.
The data. The authors assembled 157,669 startups and 248,454 founders from 1987 to 2025, using SEC filings and data providers including PitchBook, CB Insights, PrivCo, Capital IQ and Compustat, and modelled each founder's dilution round by round.
Why so many zeros? Founders are collectively wiped out in 81% of companies, because the startup fails or investors take all the proceeds in a weak exit. Even when a company does exit through an acquisition or IPO, an individual founder has a 39% chance of having left before the exit and receiving nothing. The upper tail follows a power law with a coefficient of about 1.1, more unequal than US income or wealth. The average payoff still looks attractive, at about $5.6 million per founder, or roughly $350,000 a year of after-tax income.
Not the same as "9 out of 10 startups fail". The Wharton/Zurich figure measures founder payouts at exit among VC-backed companies, not whether a startup dies in year one. In a separate long-form piece, researcher Jeroen Coelen (Doctor Market) traces the familiar "9 out of 10 startups fail" line and finds it has no solid source: the figure often cited from Dun & Bradstreet (1975) does not support a 90% failure rate, and many SEO blogs repeat the claim without a verifiable calculation. Using OECD and US Bureau of Labor Statistics survival data, Coelen argues first-year survival for new businesses is often high (up to around 90% in some European series), while five-year survival tends to land roughly in the 20–50% range depending on country and definition. He also notes that "startup" and "any new business" are routinely mixed up, and that failure itself is poorly defined (killed idea vs abandoned journey vs missed investor return). The new paper and Coelen's essay therefore answer different questions: extreme concentration of founder exit wealth on one side, and weak evidence for a universal 90% company-failure myth on the other.
The tax angle. The paper's main question is how taxing unrealised gains would affect founders. A move to accrual-based capital gains taxation would cut average founder ownership at exit from 36% to 27%, and the top percentile payoff from $661 million to $140 million. If losses were fully refunded, the share of founders with a positive payoff would rise from 12% to 44%. A wealth tax or loss carry-forward rules would bring similar dilution without that insurance, which the authors say would discourage entrepreneurship.
Why it matters now. The results land days before California votes on 3 November on Proposition 40, a one-time 5% tax on residents worth more than $1 billion that would also reach illiquid startup and VC holdings. An earlier version of the study, summarised by NBER in March, put the share of founders with a positive payoff at 16%; the updated data makes founder outcomes look even more skewed.
Sources: Azevedo, Scheuer, Smetters and Yang, Dilution vs. Risk Taking (July 2026), NBER Bulletin, Callum Williams on X, CNBC on Proposition 40, Jeroen Coelen, Do 9 out of 10 startups fail? (Doctor Market, Oct 2024).
