Published On: Mon, Nov 27th, 2017

Startups Won’t Scale Into $100 Billion Companies in Europe Unless Staff Stock Options Improve, Study

 

staff stock options: US startups have advanced opportunities to become tech titan firms the same size as Facebook, Google, Apple, and Amazon, then European startup companies.

According to Index Ventures’ study, American startups offer considerably more stock to their team. They buy talents and pay high for it. While European are choosing to allocate half the equity the Silicon Valley firms give to staff.

Employees in the U.S own 20% of late-stage startups, compared to just 10% in Europe, despite venture capital firms tripling their investments over the last five years.

At this time employees in Europe often don’t expect any stock when they take a job. They also don’t fully understand the financial benefits that come with employee ownership, according to Index. The investment firm study expects this to change in the future.

Index Ventures, the leading Venture Capital in Europe, which backed Facebook, Skype, and Deliveroo in their early stage warned that the best talent would leave Europe if startups don’t start offering the same amount of stock as their US counterparts.

Index Ventures’ study believes that Europe’s chances of creating a significant tech industry, depend on entrepreneurs and investors.

Startup founders must offer broader, more significant share option programmes for all employees. European startups should be attractive enough to appeal to the best of the best to work for them if they’re going to scale the size of companies.

Tech investors claim they want to see European governments reduce the amount of tax that people pay on their stock options.

The “Rewarding Talent” study also found that two-thirds of stock options are reserved for executives at the management level in Europe, while the reverse is true in the US.

Index Ventures founding partner Neil Rimer in a statement: “Europe risks coming short of building companies the size of  Facebook and Google if it cannot compete for the talent it needs.”

Business Insider citing Martin Mignot, partner at Index Ventures as she added: “Talent is the most critical ingredient for creating tech companies. We are calling on local governments to help level for our ambitious entrepreneurs by creating the right conditions to support and incentivize employee ownership.

“Attracting the best talent is the biggest focus for all entrepreneurs and should be the singular focus of all governments who seek to support innovation, entrepreneurialism and job growth.”

According to Index Ventures European governments’ tax policies vary, but most companies and their employees pay high on the stock they own. According to Index Ventures Germany and Spain are most in need of change. The UK has the most favorable conditions for startups.

 

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