After many interviews with founders and entrepreneurs, I’ve come to understand that the bulk of their pain points can be grouped into three categories: lack of time, misalignment with shareholders and lack of control of the business.
These problems come from a range of day-to-day tasks — including keeping a clear overview for the Cap Table, frequently reporting to shareholders, and using many different tools for equity management in general. However, one of the most common questions that comes up in my conversations with founders is about ESOPs — or Employee Stock Option Plans.
“My employees are interested in options, but where to start?”
“How do I set up an ESOP?”
“How am I expected to launch an ESOP when I’m already overwhelmed with founder duties?”
“What are the tax implications for the company and our employees?”
While many founders struggle to manage or launch an ESOP, most of them are interested in having an ESOP. In fact, a recent KPMG survey showed 68% of founders around the world are interested in or currently implementing an ESOP. It’s also clear from our interviews with founders and entrepreneurs that the benefits of an ESOP are well-known. The most commonly cited benefits of an ESOP plan are employee retention, employee engagement, access to early investment, the value of offering shares to stakeholders (employees) rather than 3rd parties.
Founders also know what they’re looking for in an ESOP. A recent LinkedIn survey that we hosted at WE.VESTR showed that the most important elements of an ESOP are easy communications with employee participants, complete reporting methods and a clear overview of the tax implications.
So, what’s keeping these founders from implementing an options plan for their employees? They want an ESOP, they know the benefits, and they can explain what the most important elements of an ESOP is.
The answer is simple: most companies are set up in an inflexible way, meaning cap tables are disorganized in spreadsheets, internal shares aren’t easily transferred, and the equity recording process is long and filled with bureaucracy. In summary — founders are longing for a simple way to set up their ESOPs, but their current equity and finances are decentralized, which makes the path to an ESOP filled with hurdles.
At WE.VESTR, we’re in the business of simplifying equity management. Our platform helps entrepreneurs centralize cap table management, financial and KPI tracking, document storage, and their equity reward structure, the Startup Co-op, in a single, digital environment.
Regardless of a company’s equity structure, WE.VESTR centralizes and digitizes everything founders and entrepreneurs need to manage their equity. With a full suite of features already available, I’m excited to announce that WE.VESTR will be launching our new ESOP feature at the end of the summer.
No matter the ESOP approach (SARs, STAK or otherwise), WE.VESTR will allow founders to easily integrate their ESOP with their cap table. Within the new ESOP feature, founders will have a digital representation of their ESOP plan including:
- The amount of options granted & the type of options available
- An overview of the participants in their plan & the percent of vested options
- The overall vesting scheme
- Storage for legal documents & ESOP agreements
- Participant messaging & notifications
- View-only accounts for each stakeholder in the ESOP
Just like that, founders will be able to easily launch and manage their ESOPs, and motivate their employees with the power of equity.
WE.VESTR is on a mission to remove hassles from the lives of entrepreneurs and to get them back to business, and I’m confident that our ESOP feature will prove to be another way that WE.VESTR does just that.