Tech firms ‘double down on equity’ in tough times
Tech companies are planning to give more equity to employees to encourage them to think like owners in a challenging investment environment, a new report has found.
Employee equity management platform Ledgy surveyed 1,200 founders, executives and employees and found that 64 per cent of companies are set to make their equity plans more generous in 2023.
Unsurprisingly, the report found that 2022 was a tough time for raising money. 51 per cent of founders across the UK, US, France and Germany said they had not raised money from investors in the last 12 months, compared to 43 per cent the previous year.
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The struggle to raise external money was felt more keenly in Germany and France, where fewer than 40 per cent of French and German companies said they had raised money in the past 12 months.
The report noted that the mature tech markets in US and UK are ahead but developing hubs like France and Germany are rapidly progressing.
In the UK and the US, more than half of tech companies had raised money from external investors, with the US having the highest proportion of founders successfully raising capital.
A gender pay gap in funding was also uncovered, with fewer female chief executives and founders completing fundraising processes than their male counterparts.
Just 38 per cent of female leaders surveyed had raised money in the previous 12 months, compared to 53 per cent of male founders and chief executives.
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“Despite the tech ecosystem coming back down to earth over the past year, there is still an enormous amount of innovation happening and equity trends are moving in the right direction,” said Yoko Spirig, co-founder and chief executive of Ledgy.
“Tech firms are doubling down on equity because they recognise that incentivising talent with a stake in the business is one of the best levers to align everyone behind the mission and vision through tougher times.
“Equity in Europe used to be a case of maybe getting a decent chunk of share options in a London startup, and not much on offer elsewhere. Our data shows that this is no longer the case. Although there is more to do, we are now seeing start-ups in markets like France and Germany establishing progressive equity plans that could give employees transformative ownership in leading companies.
“But Europe is still lagging behind the US on critical metrics like how widely equity is distributed across the team, and how much of the company’s equity is allocated to employees. We have seen some positive grassroots campaigns trying to change things in Europe, but more government support and cross-jurisdiction standardization of share option plans is needed to make equity in Europe as exciting and well-understood as equity in the US.”