The ability to offer stock options is critical for startups. They attract talented people to join the company, even though the startup may not be able offer the same high salaries as larger tech companies.
But it can be difficult to design a competitive stock options plan. VC Index Ventures, a London-based startup, is releasing a web application today that calculates all this. They also have new research about how startups reward their key employees in the US and Europe.
OptionPlan Seed, a web app that allows seed entrepreneurs to design ESOPs (Employee Stock Ownship Plans), is available. Based on analysis of options granted during the Index seed phase, the web app uses data from more than 1,000 startups.
The web app covers a variety of roles; 6 different levels of allocation benchmarks; calculates potential financial benefits for each team member (including taxes); and adapts to the political framework conditions in the USA, Canada, Israel, Australia and 20 European countries.
The web app also expands on Index’s Series A Company Option Plan, which was launched several years ago.
Index conducted extensive research to discover that stock options are available to almost all employees during the seed phase. While this is true for 97% of startup startups’ technical staff and 80% of the non-technical senior startups in the US, it is only 75% in Europe. This compares to 60 for younger non-technical employees who receive options. % rents are decreasing.
Index said that stock options are increasing in startups with a lot technical DNA and a heavy emphasis on the Bay Area. The amount of subsidy for less tech-intensive areas like e-commerce and content has not changed. The overall grants have increased as seed ratings have increased over the years.
Index found that the ESOP sizes increase in the seed stage when the hiring rate and grants per employee is higher. Index recommends that an ESOP size be set at the seed stage at 12.5% or 15% instead of the more traditional 10% in order to retain and attract employees.
According to the study, seed fundraising has seen a doubling in size and ratings while ratings in Europe have increased 2.5x.
Furthermore, average salaries for seed workers have increased by 60%. The average salary for senior tech positions in seed startups in the US is $ 185,000. This represents a 68% increase over three years and can rise to more than $ 220,000. The biggest wage increases have been seen in Europe for both technical and non-technical junior positions.
However, Index found that “Europe’s tech talent continues to have a pay gap,” with seed technicians in Europe still being paid, on average, 40-50% less than their counterparts in the US. Index found that the gap between seed technicians in Europe and their counterparts in the US had increased since 2018, “despite a decrease of the gap for technical roles”.
Index found that the European pay gap is larger than in the US, reflecting the high-priced cities of London and Bucharest as well as lower-cost places like Warsaw or Bucharest.
The global talent battle is on. The technical employee pay gap has shrunk to between 20-25% and the US.
Index concluded that ambitious seed founders in Europe need to raise the bar in technical positions. They should also look for more qualified and experienced candidates and raise more donations in order be competitive in terms of salaries.
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