Half of UK startups do not offer stock options to employees

New research shows that half of UK startups do not offer stock options to their employees as a benefit.

SeedLegals, the London-based funding and legal automation platform, has released data showing that 53 per cent of high growth UK startups are not currently offering stock options to employees.

The findings come hot off the heels of a recent report released by global VC firm Index Ventures which showed that Silicon Valley tech workers receive double the ‘reward for risk’ of their European counterparts, with US tech workers owning 20 per cent of their company compared with ten per cent in Europe.

Until now, the UK’s race with Silicon Valley was presumed to be based on factors like access to capital, access to talent, and on founders’ and investors’ appetite for risk. New reports released this week now suggest employees’ motivation for risk is a crucially overlooked factor.

Anthony Rose, serial entrepreneur, and founder of SeedLegalscomments, ‘We’ve all heard stories of Silicon Valley startup employees working insanely long hours for no money, motivated by becoming a millionaire when the company IPOs. But any UK startup will tell you that’s not the case in the UK. Employees expect to be paid the market rate, with stock options being a nice bonus on top of that.

‘Our data confirms this, suggesting UK employees expect that their primary remuneration will be cash. Their desire to work in startups is motivated more by lifestyle and the freedom to innovate rather than the chance of getting rich on an IPO. They’ll trade off a 20 per cent to 30 per cent lower salary to pursue that startup experience compared to a boring bank job, but rarely more. It will take a lot more stories of UK employees becoming millionaires on the back of hundred million £ plus exits to change that risk profile.’

SeedLegals’ data shows equity incentives for UK companies match Index Ventures’ findings for the rest of Europe. Those companies who do have stock options are offering employees around 10 percent on average.

However, SeedLegals’ data also shows that female founders are more likely to offer stock options, with 56 per cent offering equity incentives compared with only 45 per cent of male founders.

Last year, just nine per cent of the investment poured into UK startups went to companies with a female founder. Organisations such as UK Business Angels Association (UKBAA), AllBright, Blooming Founders and Code First: Girls are trying to change this and promote a greater appetite for risk amongst UK’s tech workers.