Sifted - Do employees still want stock options?

Good morning there,

Startup employees, do you know how much your stock options are worth? If the answer is no, then you’re not alone. According to our latest reader survey, 41.4% of startup employees don’t know what their stock options are worth. Founders; that leaves you with some homework to do, as I get into below. 

Elsewhere today:

• Eurazeo’s Alexandre Dewez leaving to join Harry Stebbings’ new fund in London
• Emerging managers in Europe raise more, on average, than US peers
• The Kry founders factory: Meet 12 employees-turned-founders

— Tom Nugent, newsletter editor

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😮 Paris-based Eurazeo’s VP of venture Alexandre Dewez is leaving the firm at the end of August to join Harry Stebbings in London, Sifted has learnt. Stebbings — who is one of Europe’s most prominent solo GPs — is understood to be launching a new fund, for which he has also recruited ex-DST Global principal Paul Bonnet. 

• Dewez, who joined Eurazeo over five years ago, is known for his annual 100-page report on French tech, as well as his weekly newsletter ‘Overlooked’.

👀 Klarna is lining up bankers for its long-awaited IPO, reports the FT. Morgan Stanley, JPMorgan and Goldman Sachs are all top contenders to advise the buy now, pay later giant as it prepares to list in the US, possibly as soon as next year, according to FT sources close to the company. 

🙌 UK lab-grown meat startup Meatly has become the first company in the world to get regulatory clearance to sell pet food made from cultivated meat. It’s also the first in Europe to have a cultivated meat ingredient approved for sale. 

💰 Stockholm-based GenAI legaltech startup Leya, which has developed a product to automate repetitive and manual tasks done by lawyers, has announced a $25m Series A round, just two months after raising a $10.5m seed round. Raising fresh capital so soon after the previous funding round was a matter of urgency, cofounder and CEO Max Junestrand told Sifted, as the company tries to stay ahead of a very crowded field.

💸 Bucharest-based .lumen has raised €4m from the European Innovation Council and Slovakian VC Venture to Future to build AI-powered glasses for the blind. It plans to launch its product by the end of the year.

Do employees still want stock options?

On any day there’s usually no shortage of European tech bashing doing the rounds on social media. Often it’s somewhat unfair — but one area where we perhaps do need to pull our socks up is employee stock options.

In this part of the world, we’re okay at putting a portion of the cap table aside for employees. According to an upcoming report by equity management platform Ledgy seen by Sifted, in the first half of 2024, the average employee option pool in the UK was 13.9% of the cap table, in France it was 10.4%, in Germany 9.3% and the Netherlands 8.1%.

But as I wrote a few weeks back, employees in Europe are missing out on a return from their stock options because not enough of them know how it works. Based on the results of a new Sifted reader survey published today, it’s something that founders need to work on.

41.4% of startup employees don’t know what their stock options are worth, while 39.4% don’t know their company’s latest valuation, according to our survey. That’s a problem for a few reasons.

One is that stock options are supposed to be an incentive for employees at early-stage companies — you work hard on a wage that might be less than you’d get at a corporate, but you (hopefully) see a financial return as the company scales and eventually exits. It’s harder to gee yourself up if you don’t know whether or not the options you’re sitting on are worth anything.

Employees who do graft but don’t know how the process works can end up missing out. One reader told Sifted that after leaving a “rising unicorn” they — along with some other employees who’d left — had no contact from their former employer about the value of their options or what to do with them.

They added: “Through the grapevine, I’ve heard that a couple early employees of our 'vintage’ were able to cash out (presumably through a secondary sale) while the valuation was at a high. They were startup veterans, financially savvy and close to the founders, so no doubt they understood how to advocate for a good outcome.”

Options can help — and are helping — founders attract and retain talent. Our survey found that more than two-thirds (67%) of startup staff in Europe wouldn’t have joined their company if they weren’t offered stock options.

Educating more startup employees on a) how options work and b) the value they could be sitting on should be a priority for founders; those who do get how it works have ambitions that help Europe’s tech ecosystem grow.

We asked readers what they thought the likely outcome of their stock options would be and more than a quarter (26.3%) said they thought they’d make enough money to angel invest or start their own company. That’s a good thing. More tech company alumni launching their own ventures means the potential for more wealth creation and jobs as well as a training ground for the next generation of startup founders and operators. Evidence of that can be seen in the boom of GenAI startups founded by alumni from London’s DeepMind.

It doesn’t always work out though, which is part of the risk of joining an early-stage company. Sifted recently reported that employees of UK semiconductor company Graphcore holding ordinary shares in the form of stock options or restricted stock units (RSUs) would receive nothing from its deal to be acquired by Japanese conglomerate SoftBank. Sources told Sifted that only investors with preference shares would receive a payout as the sale price of the company is less than the total amount invested to date (nearly $700m).

Employees who responded to our survey seem to understand that risk: nearly one-third (29.8%) said they think the likely outcome is their options go to zero or they get almost nothing.

You can dig into the full results of the survey here.

Readers, does this resonate with you? Are you a startup employee who’s also missed out on a return? What needs to change in Europe? Why aren’t we getting this right? Get in touch.

— Tom Nugent, newsletter editor

🏭 The Kry founders factory: Meet 12 employees-turned-founders from the Swedish digital health unicorn.

😬 Europe’s rushed attempt to set the rules for AI. (Financial Times)

Emerging managers in Europe raise more, on average, than their US peers, finds a new report published today by LTV Capital, a fund of funds. The average fund size raised by emerging managers is €61m in continental Europe and €52m in the UK, compared to €47m in the US. 

• LTV has tracked over 800 emerging managers raising around the world over two years — and is seeing a huge boom in the number of new VC firms being launched.
• “It’s the end of a fund cycle; there are a bunch of funds that haven’t performed, and a bunch that probably won’t raise their next fund… Teams are getting smaller and company valuations are underwater, so there’s a natural progression of people from larger firms and established managers moving to start new funds,” says Farhan Lalji, cofounder and general partner at LTV. “It’s also become a lot easier to start a new fund recently.”

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Copenhagen-based Again, which captures CO2 and turns it into emissions-free chemicals, raised $43m in Series A funding. Google Ventures and HV Capital led the round and were joined by investors including Kompas VC, EIFO - Denmark’s Export and Investment Fund, ACME Capital and Atlantic Labs.

Amsterdam-based Quatt, which develops and installs heat pumps using smart software, raised €25m in funding. Blue Earth Capital led the round and was joined by investors including Seaya Andromeda and Impact Equity Fund. 

Oslo-based Heimdall Power, which provides software and sensors for monitoring power grids, raised $25m in Series B funding. Orlen, NRP Zero and the Steinsvik Family Office led the round and were joined by investors including Investinor, Ebony, Hafslund, Lyse and Sarsia Seed.

London-based Bioniq, which uses AI to provide personalised supplements based on blood test data, raised $15m in Series B funding. HV Capital and Unbound led the round. 

London-based CultureAI, a human risk management platform, raised $10m in Series A funding. Mercia Ventures and Smedvig Ventures led the round and were joined by investors including Passion Capital and Senovo.

Stockholm-based Lemonado, which allows non-developers to build internal tools and automate processes without writing code, raised $1.4m in pre-seed funding. Node.vc led the round.

London-based Briefly Bio, software to improve reproducibility of lab work, raised $1.2m in pre-seed funding. Compound VC led the round and was joined by NP Hard and Tiny VC.

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