The future of employee equity distribution in German start-ups - ESOPs, VSOPs and Tokenization

Equity compensation is a noncash payment method for employees, which provides a slice of a pie or a percentage ownership of a company. employee equity distribution/ stock option plan is one of the key components for talent attraction, retention and motivation in a start-up. The tax structure, ownership rights and pre-IPO exit criteria’s have made it significantly hard for employees in German start-ups to benefit from allocated shares or stock options. Hence, there is a need to study the current trends in employee equity distribution and study the stock option schemes available for German start-ups in comparison with other countries with established employee equity participation frameworks such as U.K and U.S.A and finally, we would explore an alternative way of employee equity distribution via equity tokens for start-up landscape. Tokenization of employee stock options can help to tackle the problems in employee equity distribution, Since the advent of Security token offerings on blockchain has disrupted the financial industry, it is made stakeholders curious of its potential applications.

1. What are the current trends of employee equity distribution in German start-ups ?
2. What are the common equity distribution schemes and pain points in German start-ups, comparison of equity incentive schemes in U.S.A and U.K ?
3. Can employee equity distribution be tokenized ?

For the first research question secondary quantitative research method is used to find the trends associated with employee equity distribution in German start-ups and for the second and third research question qualitative approach is used to find the scientific solutions to the research question, this method was chosen to do the desk research about the topic.

Index Ventures

AngelList database

BaFin

Orrick legal ninja series

Neufund

Tokeny

Tokenization of assets (EnY report)

The Application of Blockchain Technology in Equity Incentive