Study: Europe’s Tech Startups Are Being Stingy With Stock Options

Study: Europe’s Tech Startups Are Being Stingy With Stock Options

More money doesn’t aways beget generosity, as Charles Dickens’ A Christmas Carol showed more than 170 years ago with its protagonist Ebenezer Scrooge. That may be the case with tech startups in Europe too. A new study from one of the region’s leading venture firms shows that startup founders here are choosing to allocate just half the equity their Silicon Valley counterparts give to staff — despite venture capital firms tripling their investments in Europe over the last five years. Startup founders will be able to use the tool to see how U.S. and European benchmarks compare in setting aside equity for employees, based on their own success at fundraising and subsequent valuation, according to Index Ventures. If you’re an engineer looking for work with a startup, you’ll probably get a better deal in California’s Bay Area, where 20% of startup equity typically goes to staff. Index says to reach such lofty valuations, founders should also share stock options more fairly with their rank-and-file. Its study found that executives at Europe's startups tend to secure more options than lower-ranking engineers, while the reverse is true in the United States. Founders aren’t necessarily being greedy. Mignot says they shouldn't think that way. In February 2017 it invited all 1,300 employees to buy share options in the luxury-fashion firm, which recently passed the $1 billion valuation mark.

Social media giants making progress on illegal hate speech takedowns: EC
Slack opens its first U.K. office, its second in Europe after Dublin HQ
Facebook expands its hate-fighting counterspeech initiative in Europe
  • Facebook
  • Twitter
  • Google+
  • Buffer
  • Pinterest
  • LinkedIn
A co-working space for startups in Factory Berlin. Germany is one of the least attractive places in Europe for people to join a startup, according to new research by Index Ventures.

More money doesn’t aways beget generosity, as Charles Dickens’ A Christmas Carol showed more than 170 years ago with its protagonist Ebenezer Scrooge. That may be the case with tech startups in Europe too.

A new study from one of the region’s leading venture firms shows that startup founders here are choosing to allocate just half the equity their Silicon Valley counterparts give to staff — despite venture capital firms tripling their investments in Europe over the last five years.

London-based Index Ventures is releasing a handbook and online tool that it hopes will reeducate startup founders about how to properly attract and compensate engineers, designers and managers.

Startup founders will be able to use the tool to see how U.S. and European benchmarks compare in setting aside equity for employees, based on their own success at fundraising and subsequent valuation, according to Index Ventures.

Till now, startup founders have decided how much to give “based on hearsay,” says Dominic Jacquesson, head of talent at Index who helped lead the study.

The result: only around 10% of a tech startup’s equity ends up being owned by its staff, on average in Europe. If you’re an engineer looking for work with a startup, you’ll probably get a better deal in California’s Bay Area, where 20% of startup equity typically goes to staff.

That’s despite a three-fold increase in the amount of money VCs have invested in European tech startups, from $6 billion in 2012, to $16 billion in 216.

The prospects are worst for tech workers in Germany or Spain, according to the firm’s ranking of startup conditions.

“An individual software engineer would probably get four times as much equity [in Silicon Valley], maybe even more, than an equivalent person in Berlin,” says…

Pin It on Pinterest

Share This