Stock options can be a powerful tool for attracting top-tier talent, but how do you ensure fairness when operating across different countries with diverse legal and economic landscapes?
For the latest Sifted Talks, decision-makers from Remote, Easop, CloudNC and Printify discussed how to approach stock options in a startup, strategies for ensuring fairness and the broader benefits of equity compensation. Our speakers included:
- Henri Lempu, head of HR at Printify, an on-demand printing startup
- Valentin Haarscher, general manager at Easop, a startup helping companies manage employee equity
- Job van der Voort, CEO of Remote, a startup aiding international hiring
- Davina Hoddinott, head of people at CloudNC, a cloud computing service
Here are the key takeaways from the panel:
1/ Recognise the power of stock options
The panel opened with a question: why are stock options important?
Remote’s van der Voort explained that stock options — which are more prevalent in US startups due to complex global regulations — boost employee retention, provide potential financial rewards from successful exits and even inspire new ventures. In fact, stock options enabled Voort to launch his own startup.
But Easop’s Haarscher raised concerns about the lack of education around stock options in Europe, which can lead to misconceptions, non-compliance and future complications. Many countries are improving their frameworks though, with the EMI in the UK and VSPC in France as leading examples.
“It's a misconception that stock options are too complex to be done; in reality, it's feasible and companies should seriously consider finding a solution for their employees.” — Valentin Haarscher, Easop
2/ Take your time and get the basics right
Printify’s Lempu was quite negative about stock options in Europe, saying it’s been somewhat like “the blind leading the blind”.
His advice? Take your time with stock options and disregard any pressure from competitors who already have established offerings. “Startups often introduce too much complexity too soon,” he said. “Find a balance that covers the basics while also considering the future.”
“Get the basics right. What’s your philosophy on grants and stock options? Where do you make exceptions? Who gets stock options? When will you review?” — Henri Lempu, Printify
3/ Prioritise fairness across your teams
CloudNC’s Hoddinott recommended startups prioritise fairness. “Fairness means ensuring consistency across our business and in what we offer all our employees, so we have transparency from day one,” she said.
Lempu added startups need to establish a clear framework to address challenging questions. Are you aiming to provide the same amount of equity regardless of salary levels, spending power or location? Or are you focusing on set amounts for specific roles?
“First, you should be as generous as possible. This will only come back to you positively. And second, let [stock options] be proportional to the risk people take [in joining the startup], especially initially.” — Job van der Voort, Remote
4/ Communicate the value of your stock options
Haarscher believes it is the employer’s duty to educate employees about stock options, not just for the sake of education, but to also encourage buy-in: “Get people excited about future valuation, the value created since they joined and what the future looks like.”
Hoddinott also thinks it’s up to the company as a whole, but singled out the leadership team. To make this easier, CloudNC has a tool that allows staff to check the value of their stock options and the business holds quarterly drop-in sessions for questions.
“Keep the conversation going to maintain engagement. It's a retention tool — if you don't talk about it, why would people stay with your organisation if they don't understand the value?” — Davina Hoddinott, CloudNC
5/ Manage your exits professionally
Haarscher said that liquidity events like an IPO typically come with a 90-day period to exercise stock options, which can result in a significant tax burden for staff. Companies can extend this period, allowing staff to make more informed decisions and they should where possible.
Van der Voort added that being flexible with the exercise period is good for business.
“If you are very rigid with the time period and recognise that there's a problem that you could technically solve but you don't, staff feel like you've been scheming them. You lose out on someone who could exit your company and say, ‘this was a really good opportunity for me to grow, plus I got stock options.’” — van der Voort
6/ Increase stock allocations over time
To wrap up, the panel was asked how investors feel about stock options.
Van der Voort said: “Investors understand that the startup is not built by investors and founders alone. They get that the first people you have to hire are incredibly crucial to the company’s success, and people are more incentivised if they have significant ownership.”
On how much equity to allocate to staff, van der Voort added that 5-20% is common but noted that this percentage might increase over time, adding that tools like ESOP can help startups manage this as they grow.
“You should be generous. It doesn't hurt you or harm you in any way. Be generous to the people you build the future with.” — van der Voort