No wonder Jack Dorsey wants to keep running Square.
Dorsey, the payment company's chief executive officer who also just took on the same role at Twitter, is the largest shareholder in Square by a wide margin, with 24.4 percent. The investment firm Khosla Ventures is the second-largest with 17.3 percent, according to Square's registration for an initial public offering filed Oct. 14.
Dorsey's sizable stake indicates that he was savvy enough to keep control of the company he co-founded. Dorsey's high-flying reputation as a Twitter co-founder helped him negotiate more favorable terms for Square than an untested entrepreneur trying to raise money could, said Jason Lemkin, a managing director at Storm Ventures. "Jack took advantage of his star power to not take much dilution," said Lemkin, whose firm is not a Square investor.
Contrast Dorsey's position with that of, say, Box CEO Aaron Levie. When the file-storage company filed for an IPO in January, the 30-year-old Box co-founder owned 4 percent. While that still makes for a nice payout, six venture-capital firms owned more shares than Levie when the company went public. Or look at Dorsey's first venture, Twitter. Evan Williams, a Twitter co-founder along with Dorsey, provided the company with early financing, which helped him maintain a 12 percent stake by the time it went public. Meanwhile, Dorsey had 4.9 percent.
Some young, first-time entrepreneurs find ways to keep investors from taking too much control away. At the time of Facebook's IPO, Mark Zuckerberg had 28.5 percent of shares—and more than half of the voting power through proxy arrangements. According to Bloomberg Billionaires, Zuckerberg is now the eighth-richest person in the world.
This month, Dorsey was named "permanent CEO" of an ailing Twitter at the same time Square was prepping for an IPO. He's said he can handle both jobs, but investors are wondering how that will play out. In terms of ownership, he's got a lot more eggs in Square's basket. "There are so many incentives for him to just spend all his time on Square," Lemkin said.