- With European competitiveness in the spotlight following the Draghi Report, Europe’s three largest economies – Germany, France, and the UK – have reformed stock option policies so they match or exceed the US.
- Stock options are now on the EU agenda, with institutions recognising the benefit of a pan-European approach and seeking a mechanism to deliver it.
- Most recently, Not Optional joined the EU Inc campaign to introduce a single, pan-European entity that would introduce a unified employee stock options programme
Not Optional – the Index Ventures-led campaign to improve stock option rules and improve conditions for employee ownership of Europe’s startups – today marks its fifth anniversary with an update to its country rankings and a call for pan-European alignment on stock option treatment.
Not Optional launched in 2019 with the support of more than 500 CEOs and founders across the continent who, in an open letter, called on legislators “to fix the patchy, inconsistent, and often punitive rules that govern employee ownership — the practice of giving staff options to acquire a slice of the company they’re working for.”
Since then, 11 European countries have improved the rules that govern stock options, and seven now have regimes that match or exceed that of the United States. The UK maintains its lead among large European economies – although changes to Capital Gains Tax rules expected on 30 October could negatively impact its ranking. Germany, meanwhile, is the biggest mover in the rankings, climbing to fifth place following reforms passed at the start of 2024. The changes resulted in a transfer over €5 billion from the hands of founders and investors to European startup employees. Five years ago, European employee ownership at late-stage startups averaged 12%, compared to 20% in the US, but today stands at 16% and rising.
Fragmented Policies Holding Back European Tech Ecosystems
Despite these achievements, low rankings for countries such as Ireland, the Netherlands, Finland, Sweden, and Switzerland highlight the need for further reform. These low scores indicate that, despite their strong tech credentials, these countries’ startup ecosystems are hampered by inadequate policies. Furthermore, the wide variation in policies across Europe continues to lead to fragmentation, making it challenging for startups to expand across Europe and hindering startups’ ability to scale.
Martin Mignot, Partner at Index Ventures, said: “When we joined forces with Europe’s leading startup founders to launch Not Optional, very few European countries had an effective stock options policy. Five years later, eleven countries have brought about reforms and many others are in the process of updating their legislation. This is critical. Every improvement makes it easier for startups to attract and retain talent, and more likely that they’ll be able to create the next tech giant in Europe.
“However, with individual Member States charting their own path, we are now urging the EU to find a pan-European solution. The recent reforms have shown there is a demand for it,” Mignot added.
Stock Options Now on the EU Agenda
Today, unlike five years ago, stock options have become a prominent focus across EU institutions. The Startup Nations Standard, endorsed by 26 countries, has highlighted this issue as a priority. The European Commission has established a Stock Options Working Group, while the European Securities and Markets Authority has urged the Commission to consider a dedicated EU-wide framework for ESOPs (Employee Stock Option Plans). Furthermore, the Draghi Report emphasised that innovative startups should have the opportunity to adopt a new EU-wide legal statute, and President Ursula von der Leyen recently appointed the European Commission’s first-ever commissioner for startups.
These developments have sparked hope across the tech and investment ecosystem that issues affecting the ability of Europe’s startups to compete globally – including stock options – could receive more attention from the bloc’s policymakers in the coming years. This momentum was further underscored by the launch of EU Inc, whose open letter made a compelling case for a pan-European startup entity under the 28th regime, with stock options as a key feature – a move supported by Not Optional.
Sebastian Knutsson, co-founder of Sweden-founded company King, said: “It’s concerning to see Sweden and other Nordic countries falling behind in the rankings, especially given our region is a tech powerhouse. As we compete globally for the best talent, we can’t afford to put our startups at a disadvantage. Without competitive stock option policies, we risk losing the edge we’ll need to build the transformative companies of tomorrow.”
Jean-Charles Samuelian-Werve, CEO and co-founder of France-founded Alan, said: “France's stock option policies have been a game-changer for startups. It’s helped us attract exceptional talent and align everyone’s interests. As we build the future of healthcare, having all our team members invested in our success has been crucial. Now it’s time to extend this advantage across Europe through a cohesive, continent-wide approach to employee ownership.”
Gloria Baeuerlein, founding partner at German-based Puzzle Ventures, said: “We’re at a critical moment in which technology and talent mobility are reshaping the startup landscape. With initiatives such as Not Optional and EU Inc, the momentum we’re seeing around improving European competitiveness couldn’t come at a better time. As Europe positions itself at the forefront of AI, quantum computing, and other breakthrough technologies, we need to ensure our workers can share in the value they create. This isn’t just about employee compensation – it’s about building a more innovative tech ecosystem for the region. The window of opportunity is now, and we must seize it.”
Not Optional country-by-country stock options policy ranking update:
Not Optional launched in 2019 with the support of more than 500 CEOs and founders across the continent who, in an open letter, called on legislators “to fix the patchy, inconsistent, and often punitive rules that govern employee ownership — the practice of giving staff options to acquire a slice of the company they’re working for.”
Since then, 11 European countries have improved the rules that govern stock options, and seven now have regimes that match or exceed that of the United States. The UK maintains its lead among large European economies – although changes to Capital Gains Tax rules expected on 30 October could negatively impact its ranking. Germany, meanwhile, is the biggest mover in the rankings, climbing to fifth place following reforms passed at the start of 2024. The changes resulted in a transfer over €5 billion from the hands of founders and investors to European startup employees. Five years ago, European employee ownership at late-stage startups averaged 12%, compared to 20% in the US, but today stands at 16% and rising.
Fragmented Policies Holding Back European Tech Ecosystems
Despite these achievements, low rankings for countries such as Ireland, the Netherlands, Finland, Sweden, and Switzerland highlight the need for further reform. These low scores indicate that, despite their strong tech credentials, these countries’ startup ecosystems are hampered by inadequate policies. Furthermore, the wide variation in policies across Europe continues to lead to fragmentation, making it challenging for startups to expand across Europe and hindering startups’ ability to scale.
Martin Mignot, Partner at Index Ventures, said: “When we joined forces with Europe’s leading startup founders to launch Not Optional, very few European countries had an effective stock options policy. Five years later, eleven countries have brought about reforms and many others are in the process of updating their legislation. This is critical. Every improvement makes it easier for startups to attract and retain talent, and more likely that they’ll be able to create the next tech giant in Europe.
“However, with individual Member States charting their own path, we are now urging the EU to find a pan-European solution. The recent reforms have shown there is a demand for it,” Mignot added.
Stock Options Now on the EU Agenda
Today, unlike five years ago, stock options have become a prominent focus across EU institutions. The Startup Nations Standard, endorsed by 26 countries, has highlighted this issue as a priority. The European Commission has established a Stock Options Working Group, while the European Securities and Markets Authority has urged the Commission to consider a dedicated EU-wide framework for ESOPs (Employee Stock Option Plans). Furthermore, the Draghi Report emphasised that innovative startups should have the opportunity to adopt a new EU-wide legal statute, and President Ursula von der Leyen recently appointed the European Commission’s first-ever commissioner for startups.
These developments have sparked hope across the tech and investment ecosystem that issues affecting the ability of Europe’s startups to compete globally – including stock options – could receive more attention from the bloc’s policymakers in the coming years. This momentum was further underscored by the launch of EU Inc, whose open letter made a compelling case for a pan-European startup entity under the 28th regime, with stock options as a key feature – a move supported by Not Optional.
Sebastian Knutsson, co-founder of Sweden-founded company King, said: “It’s concerning to see Sweden and other Nordic countries falling behind in the rankings, especially given our region is a tech powerhouse. As we compete globally for the best talent, we can’t afford to put our startups at a disadvantage. Without competitive stock option policies, we risk losing the edge we’ll need to build the transformative companies of tomorrow.”
Jean-Charles Samuelian-Werve, CEO and co-founder of France-founded Alan, said: “France's stock option policies have been a game-changer for startups. It’s helped us attract exceptional talent and align everyone’s interests. As we build the future of healthcare, having all our team members invested in our success has been crucial. Now it’s time to extend this advantage across Europe through a cohesive, continent-wide approach to employee ownership.”
Gloria Baeuerlein, founding partner at German-based Puzzle Ventures, said: “We’re at a critical moment in which technology and talent mobility are reshaping the startup landscape. With initiatives such as Not Optional and EU Inc, the momentum we’re seeing around improving European competitiveness couldn’t come at a better time. As Europe positions itself at the forefront of AI, quantum computing, and other breakthrough technologies, we need to ensure our workers can share in the value they create. This isn’t just about employee compensation – it’s about building a more innovative tech ecosystem for the region. The window of opportunity is now, and we must seize it.”
Not Optional country-by-country stock options policy ranking update:
- With European competitiveness in the spotlight following the Draghi Report, Europe’s three largest economies – Germany, France, and the UK – have reformed stock option policies so they match or exceed the US.
- Stock options are now on the EU agenda, with institutions recognising the benefit of a pan-European approach and seeking a mechanism to deliver it.
- Most recently, Not Optional joined the EU Inc campaign to introduce a single, pan-European entity that would introduce a unified employee stock options programme
Key stock options policy improvements over the past five years
- Germany: The Bundestag passed The Future Financing Act in September 2023, which includes provisions to ease employee stock ownership tax burdens in Germany. The Act came into effect in January 2024 and made one of Europe’s longstanding economic powerhouses a leader in this area.
- The UK: Government reforms to the Company Share Option Plan scheme introduced in April 2023 make it now accessible to scaleups, alongside the existing and successful Enterprise Management Incentive scheme focused on smaller startups. The UK has alluded to more improvements in the near future.
- France: The BSPCE stock options scheme was expanded in 2020 to include foreign businesses with employees based in France. Further, the price of BSPCE stock options is no longer based on the company’s VC-determined valuation, increasing the chance of higher returns.
- Spain: As part of the Startup Law passed in 2023, the total amount of tax-exempt stock options employees can receive annually increased from €12,000 to €50,000, with taxation only incurred at liquidity. This significant progress makes Spain more aligned with its leading European peers.
- The Netherlands: Since 2023, stock options are no longer taxed at exercise but instead at the point of tradeability. While the legislation is not perfect, reducing the cash-flow burden on employees is a further step in the right direction following limited changes made in 2021.
- Austria: At the start of 2024, the Start-up Promotion Act enabled companies of a certain size to issue stock options to employees that are only taxed at the point of sale.
