Why set up a share scheme? We hear this question a lot. But rather than us harping on, we asked some of the UK’s most progressive startup founders to share the reasons why they decided to share equity.
There are 10 different ways UK businesses can distribute equity. Some schemes are HMRC-approved. While those that aren't tend to be more flexible but not so tax-advantageous.
As part of our ongoing Founder Stories series (where we interview entrepreneurs across industries), we asked the following startup founders if they have a share or option scheme in place for one or more team members.
And, if so, to tell us why and what impact it’s had on the business.
"We have a few performance-related schemes which are designed to make everyone in the team as entrepreneurial as possible, whilst thinking longer-term about the health of the business and client satisfaction.
The impact of staff with equity is predictably positive. Ownership compels and propels."
"We have a share option scheme for two members of our management team, who we couldn't afford to pay, so we brought their expertise and insight into the business by giving them both the chance to have a good shareholding of the company via an option scheme.
I think this is a really good way of finding out how much people believe in you, your business and the plan."
Nick Aldrich, founder of Only The Brave
"We gave away 22% of the business to our senior management team. The business gets undivided loyalty, passion and dedication and the new partners get to take advantage of their efforts through well-deserved dividends, plus a payout if the business was sold. Everyone wins."
"All full-time [UK-based] members of our team have share options. I don’t believe people join a company our size because of shares, but it does make a difference for engagement and retention when you know you share in an outsized benefit if the thing you’re building is a success."
"We have an EMI share option scheme. It gives holders a greater sense of ownership and ambition. Sharing potential success is always a great motivator."
"[The scheme] has bonded us all together with a common goal. [The team] are invested in the business and excited to see the growth."
"It is critical that everyone has a stake in the company. On top of that, we have been through three successful crowdfunding rounds to date, and every person in the company has invested some of their own money in one or more of these."
James Baillie, founder of Wundr
"We have founder’s shares in place and an option scheme ready to activate once Wundr grows our team a little more. It's key that everyone who works in Wundr has some ownership of the business so that everyone is aligned to making things a success."
"Every team member gets options and it’s enabled us to give a little piece of the ‘blue beast’ [the company] to all and unified our efforts to make Oxwash a place where everyone feels like they add value."
"The share options scheme enabled me to entice key people into the team. They are invested in the company for the financial long run.
Their shares and investment grow as the company grows, which is perfect for motivation and loyalty. I’m very thankful for the Vestd [platform] as it took the headache away from the whole process!"
A few more founders intend to set up a share scheme soon, including Catherine McArthur founder of Thirdshift, and Rebecca Taylor founder of Aquarate. So, what are their reasons?
For Catherine, it’s important to offer team members the opportunity to own a piece of what they’re working together to build.
If employees have a slice of the action, they're more inclined to give it their best shot. We call this The Ownership Effect.
Similarly, Rebecca is keen for the team to share in the success of the journey they’re on together. What better way to reward the team for their dedication and contribution than with a share in the business?
A big thanks to all founders for their insight on share schemes. Want to follow suit? Book a call with one of our team and see how Vestd makes sharing equity simpler.
Grace Henley: 13 September 2023
Sam Jeans: 29 August 2023
Jemma King: 22 August 2023
Grace Henley