Did you know that employees in EU startups own only half as much equity compared to US ones? (10% vs 20% by the time of exit). This is crazy when we know that talent is one of the key driver of Silicon Valley’s success! Joining a startup is risky, yet too many startups fail to reward their team adequately. Some of this is caused by poor government policy, but there is much more that entrepreneurs can do. ✨  So Index Ventures, one of the most prestigious VC, took the matter into their own hands and wrote a comprehensive guide to stock options for EU startups! Dominic, Head of Talent at Index, will be with us to present their 16 best practices for the next-gen of European startups: - How much to award to whom? - When to make grants & how to communicate their potential value? - How big should your ESOP be? - What to do about promotions? High performers and leavers? And many more! Do yourself (and your team) a favour and learn the best way to attract & retain your best talent  ** Dominic is working with Europe-based founders and senior executives across Index’s portfolio, on talent-related issues including assisting select executive searches, international expansion, building in-house talent operations, and providing functional expertise in various HR areas such as compensation and org design. Prior to joining Index, Dominic served twice as a Chief Operating Officer and has first-hand experience scaling companies between zero and 400 people.

1. Rewarding Talent
Sixteen tips for designing your
stock option plan
Dominic Jacquesson
Director of Talent at Index Ventures

2. Talent is your key bottleneck
Building a world-class company requires a world-class team
1 Attract
2 Retain
3 Motivate
4 Align

3. Your secret weapons...
Two things that startups can uniquely offer
1 Culture & Mission
2 Financial Upside

4. ESOP size in Europe is half that in the US
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Inception Seed Series A Series B Series C Series D
Average founder ownership in cap table
Average investor ownership in cap table
Average employee ownership in cap table
(ESOP combined)
Evolution of ownership in US startups across funding rounds
(where Founding CEO remains in place)
European average 10%
from Series A-D

5. Why?
1 Mindset
2 Government policy
3 Risk appetite
4 Lack of benchmarks

6. 1 Right-size your ESOP
20%
15%
10%
5%
0%
Seed Series A Series B Series C
Current Europe
Index baseline suggestion
Index deep tech suggestion

7. 2 Make everyone an owner
• Give everyone some stock options
• At least through to 150 employees
• Create team alignment
All-employee ownership levels in Series A/B startups
80%
70%
60%
50%
40%
30%
20%
10%
0%
Bay Area Rest of US UK Rest of Europe

8. 3 Upfront versus delayed grants
• Executives and engineers get their full
grant upfront
• Other hires - 5% of salary as upfront
grant, assess 6-12 month performance
before granting more
“Giving a big upfront grant
makes it hard to optimise for
someone’s actual contribution.
You don’t really know how
good someone is when you
hire them – but you know a
lot more about them a year
or two in.”
Clint Smith
Experienced US Corporate
Development Executive and
Startup Board Member

9. 4 Grant size - Executives
* Pre-dilution
Level C-level VP level
Ownership range 0.8% - 1.5% 0.4% - 0.7%
Number Maximum of three true C-level
execs as you scale
Could build a team of five to eight
VP-level execs
Upside if $1bn exit $10m* $4-7m*

10. 5 Grant size - Rest of your team
Size of initial option grants expressed as
a % of salary baseline
33%
15%
5%
50%
20%
10%
75%
33%
33%
Engineering,
Product,Business
Development
Marketing,
Finance,HR
Sales,
Customer
Success
Individual Senior Director

11. 6 Grants - The full picture post-Series A
Typical hiring plan and grants
between Series A and Series B
Function Level No. of
hires
Grant %
of salary
Grant $
indicative
Executives C-level 1 $250,000
VP-level 3 $100,000
Engineering, Product, BizDev Director 2 75% $97,500
Senior 10 50% $40,000
Individual 15 33% $20,000
Marketing, Finance, HR Director 2 33% $36,000
Senior 4 20% $13,000
Individual 5 15% $6,000
Sales, Customer success Director 1 33% $26,000
Senior 2 10% $5,000
Individual 5 5% $1,500
TOTAL 50 $1,600,000

12. Superstars
15%
2x
Critical
Contributors
20%
1–1.5x
Heartaches
5%
0x
Rising Stars
15%
1–1.5x
Reliable
Contributors
20%
0–0.5x
Steady Eddy
5%
0x
Tomorrow’s
Stars
15%
0–0.5x
Steady Eddy
Junior
5%
0–0.33x
Mis-hires
0%
–
Contribution today
Potentialforfuture
High
High
Low
Low
7 Modulate grant size by performance
The Index Ventures
Performance Evaluation Grid
Evaluate 6-12 months after hire
1
2
3
Legend to grid
1 Tagline
2 Typical percentage of startup team in this box
3 Multiple of ‘base’ grant

13. 8 Offer cash < > equity trade off
• Risk appetite varies by individual
• Up to 15% of salary
• Ratio 1:1 for simplicity
• Be clear of impact on future salary increases

14. 9 Be consistent
• Don’t rely on people not comparing notes
• Clear formulae and guidelines
• Avoid exceptions

15. 10 Go for the lowest strike price
• Maximise employee upside
• Fair market valuation where available – UK, US
• What’s possible varies by country – UK, US
• But don’t hit your company with a tax bill
“Issue options at the lowest
strike price you can. Maximise
the financial benefit to the
employee, and therefore the
motivational benefit you can
get from a given number of
options granted.”
Neil Rimer
Partner, Index Ventures

16. 11 Be generous to leavers
• Few early employees stay through to IPO
• Reward them for their contribution
• Leavers exercising options is a great outcome
• Creates ambassadors for your talent brand
• Best approach varies by country
• US ninety days to exercise, else lose
• Extended exercise periods
• Retain-but-cannot-exercise until exit
“Leavers have earned their
right to exercise and become
shareholders. You also don’t
want them talking badly
about you after they leave –
this could damage your
talent brand.”
Martin Mignot
Partner, Index Ventures

17. 12 Minimise accelerated vesting
• All-employee acceleration at ¹⁄³ of European startups
• Unheard of in the US
• Deterrent to potential acquirers
• Recommend double-trigger acceleration for entire
executive team
“All-employee acceleration is
bad practice because you are
sending the message that an
acquisition is the end of the
road. Buyers would definitely
disagree with that.”
Dominique Vidal
Partner, Index Ventures

18. 13 Refresher grants are critical for scaling
• Retain your key people as you scale
• Offer at 2½ years into a 4 year vesting cycle
• Introduce a standard program post-Series B
• Target high performers – use the grid from earlier
• Maybe just top 20%, or up to 50% of your team
• Grant size as if you were newly hiring the individual
“We didn’t do refreshers very
well – we hadn’t expected
we’d need to. It never became
systematic, always ad hoc,
which was a mistake. We lost
good people, and others lost
motivation.”
Peter Campbell
CFO, Mimecast

19. 14 Celebrate employee secondary sales
• Long journey to exit
• Highly motivational
• Builds your talent brand
• Only if excess demand when you fundraise
• From Series B onwards
• Discount of 15% is typical
• Any fully vested employees – not just execs
• Limit to 25% of vested options and e.g. $100k upside
“At our last fundraise, and
with the encouragement of
Index, we allowed employees
to exercise and sell up to
25% of their vested options,
which really boosted team
motivation.”
David Okuniev
Co-Founder & co-CEO, Typeform

20. 15 Celebrate your option scheme – but don’t hype it
• Executive hires – 1:1 sessions
• Promotions and top performers – 1:1 sessions
• Group sessions for other employees
• Assume employees know nothing about stock options
• Make it clear that there is no upfront cost or risk
• Outline different scenarios to illustrate potential upside
• Offer letter with further details

21. 16 Further Index resources
Rewarding Talent
A guide to stock options for
European entrepreneurs
Both resources available at
indexventures.com/rewardingtalent
OptionPlan
Design your stock option plan
covering every team member

23. Q&A
Dominic Jacquesson
Director of Talent at Index Ventures