7th Feb 2023
Founders and policymakers recognise the critical role of talent and continue to embrace stock options as a way to strengthen European startups and drive innovation
Step-change in the use of stock options schemes by European startups over the past 5 years, closing the gap with Silicon Valley levels
Policy improvements made to schemes in Ireland, the Netherlands and Spain at the beginning of 2023, and further reforms planned this year in the UK, Austria and Belgium
A new analysis by the Not Optional campaign revealed today that over €5 billion has moved from the hands of founders and investors to European startup employees over the past 5 years.
As startups continue to operate in a challenging macro-environment, this increase in employee ownership reflects growing recognition of the importance of rewarding talent by both entrepreneurs and investors. The improvement also comes as Ireland, the Netherlands and Spain introduced reforms to national stock option schemes from 1 January 2023, with further improvements planned in the UK, Austria and Belgium later this year.
Not Optional was founded by Index Ventures and 700+ CEOs, with the aim of improving the competitiveness of European startups by helping them attract the best global talent. When it launched in 2017, European employee ownership at late-stage startups averaged 12%, compared to 20% in the United States — where employee ownership has long been recognised as a vital tool to attract the best talent. The new analysis finds that this has now risen to 16% in Europe. With 124 new VC-backed unicorns in Europe in 2021 and 2022, this represents an additional €5 billion of value that is now in the hands of employees. As more startups mature, this number will multiply many times over, drawing in more talent to Europe’s innovation ecosystem.
This step-change is in significant part thanks to policymaker engagement and reform, helping to overcome outdated rules and regulations that limit employee ownership.
Following the changes in Ireland, the Netherlands and Spain, the Not Optional country ranking, which takes a range of factors into account to score the effectiveness of 24 separate national stock option schemes, has been updated, with these countries all improving their position.
Momentum is also gathering pace at a pan-European level. Following the publication of the New European Innovation Agenda in July last year, the Commission is now expected to establish the European Stock Options Working Group led by Commissioner Mariya Gabriel, and the Directorate-General for Research and Innovation. This will mark the first time a Commission expert group is set up to solely address the issue of stock options reform at the European level, signalling that EU policymakers are finally appreciating the need for a more harmonised approach.