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The main reason behind the lack of EU successful startups is that they can’t attract talent because they can’t pay employees in stock options which means that w

The main reason behind the lack of EU successful startups is that they can’t attract talent because they can’t pay employees in stock options which means that when one happens to succeed only few people get rich, instead of what happens in the US were most employees get rich and some of them go on to create beer startups. There is no such cycle in Europe, and it’s all because the lack of stock options. Without them, startups only offer very low pay with little to no reward, and good luck trying to attract the top talent startups actually need to succeed.

IgorPartola 6y ago
Why can’t they offer actual stock instead at that point?
- rfrey 6y ago
  Then employees would need to immediately pay tax on the stock based on the last valuation.
  - messe 6y ago
    I'm not sure about stock options, but RSUs are reasonably common in Ireland. Tax isn't paid on them until the vest date.
    - smachiz 6y ago
      RSUs work because they're typically for already public companies. At vest, in the US, a percentage of shares are immediately sold to cover taxes. With illiquid stock - as in a startup - where there's no public market for it, and no one to sell it to, you can't really do that, and you're creating a tax problem for your employees. The company can pay those taxes on your behalf - but that's expensive when a startup is explicitly paying in stock because they need the cash to grow.
  - holoduke 6y ago
    most European countries use Sars (stock appriciation right) tax is collected at the very end. against a 50% tax cut though (in most EU countries)
justicezyx 6y ago
> in the US were most employees get rich Really? I thought most startup get a successful exit, result into their employees being modestly compensated, probably on par with the counterparts in mega corps.
- NegativeLatency 6y ago
  Enough get enough money to perpetuate the myth of "everyone" getting rich in my experience.
alpha_squared 6y ago
> ...instead of what happens in the US were most employees get rich and some of them go on to create beer startups. Do most startup successes (which themselves are quite rare) result in most employees becoming rich? I've had my share of successful startup experience as an employee, and there was a nice payoff, but I'd hardly call it "rich" in any accepted definition of the word. At best, it's made up for the time I spent being underpaid compared to market rates.
- macNchz 6y ago
  I think your experience is likely the most common, but ultimately the "startup ecosystem boosting" effect being discussed really only needs the occasional company to come along and dramatically outperform, creating a couple hundred new startup-minded millionaires who want to invest or create their own companies.
  - alpha_squared 6y ago
    When a company has that sort of exit or IPO that results in a couple hundred new millionaires, it also usually has at least a couple thousand non-millionaires. That still sounds like a far cry from "most" becoming rich.
thephyber 6y ago
> when one happens to succeed only few people get rich, instead of what happens in the US were most employees get rich I don’t think this is accurate. Even in successful startups, most employees don’t get rich. Yes, some manage to navigate the complicated financials and can afford to execute their options, but typically only valuable roles are offered stock options and not all employees can afford to execute them. Even if the company is “successful” and goes IPO, employees that execute their options can lose money while trying to execute their options (many Uber employees right now and plenty of 1999-2000 IPO employees). In short, stock option incentives are gambling. I’m not sure they are a net positive even for the USA. Yes, we get harder workers for cheaper, but this depends on VC and Fed Reserve money being plentiful, which comes with other costs.
- jacobr1 6y ago
  > but typically only valuable roles are offered stock options and not all employees can afford to execute them. For early stage startups in the valley, pretty much all employees receive options. How many options, dilution and if if a positive exit will occur are all variables, but generally everyone gets an option grant.
  - thephyber 6y ago
    I think I was pretty accurate in your parent comment. Employees who don't stay long enough to vest (much or at all) don't get rich. Employees who work in roles like office admin, security guard, janitor, intern, etc. usually aren't offered options (frequently because they are outsourced or independent contractors, etc). I'd wager that engineers, designers, and management are consistently offered options, but most other roles vary. Sales frequently insists on large cash commissions, so management probably wouldn't augment that with expensive early stock options. There is inherent risk in owning stocks -- you need to time your exit well or a wise purchase in options/RSUs can turn into a financial liability or can significantly cut your profits if you exit the stock at the wrong time. I have a friend who exited FSLY as soon as their options execution turned to long term cap gains (resulting in a comfortable profit), but they could have more than doubled their profits (and been borderline "rich") had they stayed in until peak. Employees don't always time their options/RSU executions well (because life is unpredictable). There is an opportunity cost to risking startup life at a lower up-front salary than working at a larger more stable company that pays more but offers no stock benefits. Employees can't afford to execute their options/RSUs at the right time (eg. I could have owned significant CloudFlare stock if I was better at saving money while in university). Employees don't always spend the money to gamble on options/RSUs and their tax obligations because they don't anticipate the company worth much (which can be a misperception or a lack of trust in management/owners).
retube 6y ago
Sorry that's complete nonsense. it's routine in Europe and the UK to offer stock options. what's more you're only taxed when any gains are actually crystallised - so much more attractive / less risky than the US.
- redisman 6y ago
  That's.. how it works in the US. I have options. I haven't paid any tax or received any actual stocks.
- Jommi 6y ago
  This is not completely true. The taxation differs country to country in Europe.

IgorPartola 6y ago

Why can’t they offer actual stock instead at that point?

rfrey 6y ago
Then employees would need to immediately pay tax on the stock based on the last valuation.
- messe 6y ago
  I'm not sure about stock options, but RSUs are reasonably common in Ireland. Tax isn't paid on them until the vest date.
  - smachiz 6y ago
    RSUs work because they're typically for already public companies. At vest, in the US, a percentage of shares are immediately sold to cover taxes. With illiquid stock - as in a startup - where there's no public market for it, and no one to sell it to, you can't really do that, and you're creating a tax problem for your employees. The company can pay those taxes on your behalf - but that's expensive when a startup is explicitly paying in stock because they need the cash to grow.
- holoduke 6y ago
  most European countries use Sars (stock appriciation right) tax is collected at the very end. against a 50% tax cut though (in most EU countries)

justicezyx 6y ago

> in the US were most employees get rich Really? I thought most startup get a successful exit, result into their employees being modestly compensated, probably on par with the counterparts in mega corps.

NegativeLatency 6y ago
Enough get enough money to perpetuate the myth of "everyone" getting rich in my experience.

alpha_squared 6y ago

> ...instead of what happens in the US were most employees get rich and some of them go on to create beer startups. Do most startup successes (which themselves are quite rare) result in most employees becoming rich? I've had my share of successful startup experience as an employee, and there was a nice payoff, but I'd hardly call it "rich" in any accepted definition of the word. At best, it's made up for the time I spent being underpaid compared to market rates.

macNchz 6y ago
I think your experience is likely the most common, but ultimately the "startup ecosystem boosting" effect being discussed really only needs the occasional company to come along and dramatically outperform, creating a couple hundred new startup-minded millionaires who want to invest or create their own companies.
- alpha_squared 6y ago
  When a company has that sort of exit or IPO that results in a couple hundred new millionaires, it also usually has at least a couple thousand non-millionaires. That still sounds like a far cry from "most" becoming rich.

thephyber 6y ago

> when one happens to succeed only few people get rich, instead of what happens in the US were most employees get rich I don’t think this is accurate. Even in successful startups, most employees don’t get rich. Yes, some manage to navigate the complicated financials and can afford to execute their options, but typically only valuable roles are offered stock options and not all employees can afford to execute them. Even if the company is “successful” and goes IPO, employees that execute their options can lose money while trying to execute their options (many Uber employees right now and plenty of 1999-2000 IPO employees). In short, stock option incentives are gambling. I’m not sure they are a net positive even for the USA. Yes, we get harder workers for cheaper, but this depends on VC and Fed Reserve money being plentiful, which comes with other costs.

jacobr1 6y ago
> but typically only valuable roles are offered stock options and not all employees can afford to execute them. For early stage startups in the valley, pretty much all employees receive options. How many options, dilution and if if a positive exit will occur are all variables, but generally everyone gets an option grant.
- thephyber 6y ago
  I think I was pretty accurate in your parent comment. Employees who don't stay long enough to vest (much or at all) don't get rich. Employees who work in roles like office admin, security guard, janitor, intern, etc. usually aren't offered options (frequently because they are outsourced or independent contractors, etc). I'd wager that engineers, designers, and management are consistently offered options, but most other roles vary. Sales frequently insists on large cash commissions, so management probably wouldn't augment that with expensive early stock options. There is inherent risk in owning stocks -- you need to time your exit well or a wise purchase in options/RSUs can turn into a financial liability or can significantly cut your profits if you exit the stock at the wrong time. I have a friend who exited FSLY as soon as their options execution turned to long term cap gains (resulting in a comfortable profit), but they could have more than doubled their profits (and been borderline "rich") had they stayed in until peak. Employees don't always time their options/RSU executions well (because life is unpredictable). There is an opportunity cost to risking startup life at a lower up-front salary than working at a larger more stable company that pays more but offers no stock benefits. Employees can't afford to execute their options/RSUs at the right time (eg. I could have owned significant CloudFlare stock if I was better at saving money while in university). Employees don't always spend the money to gamble on options/RSUs and their tax obligations because they don't anticipate the company worth much (which can be a misperception or a lack of trust in management/owners).

retube 6y ago

Sorry that's complete nonsense. it's routine in Europe and the UK to offer stock options. what's more you're only taxed when any gains are actually crystallised - so much more attractive / less risky than the US.

redisman 6y ago
That's.. how it works in the US. I have options. I haven't paid any tax or received any actual stocks.
Jommi 6y ago
This is not completely true. The taxation differs country to country in Europe.