The notion of notional values — P3
Our Ideal Equity Program…for now
CrowdEmotion lives at the intersection of people and technology. This four part blog series explores our considerations around equity based motivations to drive innovation through diversity and collaboration in the UK tax system.
Part 1: What is an options scheme?
Part 2: How should our share options work?
Part 3: Our Ideal Equity Program…for now
Part 4: Making this work within the UK
Disclaimer: I am a business owner and not an accredited legal for financial advisor. All opinions are my own and I cannot be held accountable for action taken against them.
3/ Our Ideal Equity Program
Individual choice promoted at scale
Lots to consider. At the core, we need smart, quirky people working together to address abstract problems. So, as a business, best to provide the option of equity, but only motivated by company goals rather than strictly on vesting periods.
Out of principle, we believe equity is earned, not given. This keeps the motivation value of equity high driving an expectation of achievement.
We landed on two equity routes and a non-equity route:
Equity: Direct buy-in — during investment rounds, employees have pre-emption rights to buy into company shares directly
Equity: Salary Sacrifice Share Options — great for attracting those PhDs early in their careers or other startup vets who can make a difference. Scares off the money seekers early on. Vesting schedule follows:
- 50% vests over 4 years
- 50% vests upon £2M in ARR and V1.0 of the product (target for NOW)
Cash: Profit Sharing — a profit pool is created and split by percentage buckets across different tiers. This provides motivation for those who prefer incentive via cash rather than equity.
Combined, these give the team member ownership and control on their lives while providing alignment with the company.
We believe in total personalisation, so we landed on a system where we would agree to a total value for a role upon which, the employee could choose how much they would like that value paid in share options, salary, or cash incentives.
Before settling, we determine contribution value to the business so we can understand the total compensation for a team member.
Once agreed, we then discuss how the team member would like to break this up between Salary, Bonus, and Share Options. This helps us comply with HMRC while enabling team members to earn equity through contribution value if they so desire.
Next up: Making this work within the UK.
I hope you found this useful. Every company is different and the simple exercise of answering some of these questions can unveil a lot about your employees methods for making decisions, risk propensities, and value drivers for motivation.
About Me:
The benefit of being 33 and starting a company after 10 years in corporate life is you understand the receiving end of things like share options and buying into private companies. To add to the fun, I am Canadian having worked in a North American (NA) style tech startup. I decided to start my company in the UK with a Canadian culture… under UK tax guidelines. Square peg <> round hole.
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M
