Fintech/Analysis/ Which fintechs offer the best — and worst — equity deals to employees? We looked into which European fintechs offer staff the most generous equity deals, including options pools and vesting clauses. By Isabel Woodford 2 June 2021 Anne Boden, founder of UK challenger bank Starling. Anne Boden, founder of UK challenger bank Starling. \Fintech Which European banking app is winning the race for customers? By Amy O'Brien 21 February 2023 Fintech/Analysis/ Which fintechs offer the best — and worst — equity deals to employees? We looked into which European fintechs offer staff the most generous equity deals, including options pools and vesting clauses. By Isabel Woodford 2 June 2021 One of the (many) perks of working at a startup is receiving equity — in other words, a slice of the pie. That’s all the more true at fintechs, where soaring valuations have the potential to make early employees a small fortune — at least on paper. Still, startups vary in how much of the pie they offer, whether they hoard equity just for the c-suite and the clauses they impose as they get older. This not only impacts the compensation awarded to employees, but also the future of the ecosystem, with many alumni going to finance new tech projects with their equity. So where do Europe’s top fintechs rank on the all-important equity question? The results We assessed the equity policies at over a dozen fintechs in Europe. To collect the data, we asked the companies what percentage of their shares they’ve allocated in an options pool (a good proxy for generosity) and whether new joiners still get equity. We also crossreferenced with several employees themselves, as well as drawing on information from CapDesk and Glassdoor. This helped give us an idea of any sneaky clauses that would weaken the company’s ranking. Based on this analysis, Europe’s top fintechs can be categorised as shown below: Note: The exact details of companies’ individual equity packages remain confidential on the whole, so candidates’ offers may vary. Individual companies aside, we can also conclude that Europe’s fintech sector is fairly generous. According to Capdesk, the average options pool among European fintechs stands at 18.25% (with a median of 14.5%), based off a sample of 35 fintechs from seed stage to Series C. That sits above the European tech average that’s estimated by Index Ventures to stand at 10%. Highly recommended Fintechs with the largest options pools for staff feature at the top of our ranking, provided they do not have unusual vesting clauses attached. Starling seems to have one of the largest employee equity holdings, telling Sifted that 24% of the company is already in the hands of current and past employees. The company also told Sifted that all employees get 4k options (worth an undisclosed amount), and that new joiners continue to receive that standard offer. Still, it’s worth noting that it’s a relatively new policy, having only introduced it in February 2020. The company has also had a reputation for its strict ‘bad leaver’ strike, with a handful of senior figures leaving equity-less. Meanwhile, Thought Machine said that it’s allocated 18% of its share to the options pool, while Freetrade said it has currently allocated 15%. Freetrade also said that it was standard for new staff to be given options to the value of 10% of their base salary when they join, while more senior staff could get options worth over 90% of their annual pay. In addition, Capdesk — a programme for founders to manage their cap table — also flagged three more fintechs with good equity programmes. After seeking client permission, Capdesk recommended gohenry, Nutmeg and Billie who are “currently offering good equity packages to their employees.” Indeed, Billie has actually discovered a way around Germany’s tricky tax laws by issuing phantom shares instead of stock options. The standard tribe Several fintechs are ranked in the middle, having adopted a so-called “standard” policy. Wise and Monese both disclosed that their options pool sat at ~10%. They also followed the standard practice of a four-year vesting schedule with a one year cliff. Several other companies declined to comment on the size of their options pool but confirmed they still gave equity to new joiners with normal vesting policies, putting them in the ‘middle’ category. “Revolut used to be amazing for equity, but now they offer growth shares, which are useless” Reviews and figures submitted on GlassDoor also hint at the ‘standard’ stock bonuses available at some firms. For instance, one product owner at Revolut shared that their equity offer was worth £22,645 (when fully vested, at the current valuation). Meanwhile, a data scientist at Revolut said they had received £10,185 worth of options. Still, one ex-employee stressed that “Revolut used to be amazing for equity, but now they offer growth shares, which are useless”. Growth shares vest immediately but cannot be cashed in below a certain valuation, so technically give the holder less rights. Meanwhile, a Monzo ex-employee said that the digital bank had started off as a model for the industry. “Tom [Blomfield] made Monzo options a lot more employee-friendly than the industry standard. Things like 10 years to exercise after you leave instead of golden handcuffs,” they said. Although Monzo’s policy is now in line with the standard, it is currently hiring a ‘Head of Total Reward’, to be a hands-on manager of the shares programme. For its part, Klarna added that it had “invested considerably for a global [equity] programme to be implemented” to accommodate both the EU and the US jurisdictions. Meanwhile, Curve has introduced a ‘low medium and high’ options policy, given employees to trade in more equity for a lower salary. 👉 Read: How much equity should you expect from an early-stage startup? Falling short At the bottom of the ranking are companies where Sifted has heard reports about below-average equity schemes. Among them is Germany’s N26. Although its founder Valentin Stalf is a signatory on the ‘Not Optional’ pledge, insiders say that the shares policy at the firm has long been worse than many competitors. Clauses included a four-year cliff, which meant that employees who left before four years generally walked away with nothing (bar some exceptions for those close to the c-suite). One source noted that this practice is still fairly typical in Germany. The company replied saying that, last year, it reviewed its policy and reduced the cliff to 1 year. They added that 70% of N26 now have equity. Meanwhile, Checkout.com — which was recently valued at $15bn — also has a reputation for not giving employees an equity stake in line with many other fintechs. The company declined to comment. Finally, wefox — which just secured a fresh $650m in funds — told Sifted that only one-third of staff have equity in the business. The company stressed it was working to improve that representation. Moreover, employees are only entitled to join the equity scheme after completing two years at wefox . They then receive ~10% of their salary in ‘phantom’ shares that vest over time. *Note: Following the publication of this article, wefox agreed to give all existing employees options worth €5000. The company has also set up a buyback scheme to sell the options at a future date, once vested. Going further Some European tech startups are clearly beginning to think more carefully about their equity schemes. This is being fuelled in large part by candidates themselves, who are now “negotiat[ing] aggressively for equity”, according to executive recruiter Alex Langridge. Nonetheless, commentators say that — overall — Europe is still far behind the US. “On average, European employees end up with only half as much ownership in later stages, compared to their US counterparts,” a recent report by Index Ventures found. Tax rules in different EU countries also means that places like Germany, Spain and Belgium are very unfavourable when cashing in equity. This is shown by the ‘Not Optional’ ranking — a comprehensive resource for stock options across Europe. Regulation and company policy aside, another barrier for staff is actually cashing in on any equity they do vest, with founders and early investor using getting priority for liquidation. Top tips for candidates If getting equity is important to you, there are some easy ways to sniff out if your new employer takes it seriously too. First, ask your new employer if they use an equity programme (like CapDesk or Shareworks). If the answer is yes, it generally means they have a good grasp on how shares works and the need for transparency. Second, ask about the cliff and good leave/bad leaver policy. This is critical in determining how many shares you’ll get when you leave. Still, shares aren’t everything (especially given they’re worthless without an exit)! Below is a refresher on past analyses conducted by Sifted around employee satisfaction at Europe’s top fintechs. Note: This graphic is from 2020 so some companies may have seen their scores change *** Are you a fintech with a great equity programme? Are you a fintech employee with thoughts on your share package? Let us know! Email [email protected] Isabel Woodford is Sifted’s fintech correspondent. 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