Our guest author Eric Demuth calls for the creation of uniform regulations for employee share ownership in Europe at long last. Otherwise, start-ups would not be able to attract good employees.
No world-class product without a world-class team: as simple as that may sound, the implementation is bitter. The talent market has never been so competitive.
The fact is, it's probably a Herculean task for any scale-up to get the crème de la crème of the international tech scene. In my opinion, the best incentive of all is to let talent participate in the company's success and thus turn employees into co-entrepreneurs.
Equity is the pull factor par excellence: there is no way around employee participation. Silicon Valley has shown the way. They have been doing something with this topic for over 30 years. Just take the story of the part-time masseuse who joined Google early on and eventually became a millionaire. Or consider the so-called PayPal mafia and its highly lasting impact on the entire industry, in that a great many former PayPal employees have now built very large companies themselves or become successful investors themselves.
The advantages of employee share ownership are obvious: employees have a direct influence on the company's valuation through their performance, can contribute, participate - and earn from it. Stock options increase in line with the valuation. Those who participate think more carefully about how they contribute to the company and are even more committed. Keyword retention management: Employee participation also has an effect on loyalty. No bonus can achieve the same level of identification with the employer as the ownership of company shares. The most important criterion for this is that people can identify with the vision and the company and believe in their own impact. And thinking further, employee ownership can empower employees in particular. For example, someone who has already worked for three successful companies in their late 30s would already have a portfolio together that could sometimes be used for private pension provision. Alternatively, the capital can be used to set up their own companies - this would force a cycle on which we will soon be more dependent than ever. In short, it pays off for all sides.
In Austria, only about six percent of employees have a capital stake in their employer company. Hardly surprising, since the tax incentives are rather low - which explains the low willingness to implement employee share ownership in concrete terms. You have to get downright creative to find adequate solutions and answers to the problem of taxation and all the glaringly outdated conditions - the next huge location disadvantage. At Bitpanda, we have solved this via virtual equity stakes. What's missing here is fairer taxation by the government. This puts us at a massive disadvantage to other countries that have solved employee shareholdings properly in terms of taxation.
The technology scene is in danger of being left behind
It's also stupid in Germany, which despite recent adjustments is still a long way from being an attractive and competitive fund location. I don't understand this German fear of reform. Instead of taking useless mini-steps over many years - until one arrives just before the bang - once properly adjust laws that correspond to the present.
More progressive solutions in terms of employee participation have long been standard in all major international start-up locations. In the UK, employee ownership is even part of the economic and corporate culture of "popular capitalism", and is seen primarily as a means of increasing productivity. The Enterprise Management Incentive Scheme (EMI), introduced in 2000 and revised since, is a highly beneficial scheme used by almost all UK tech start-ups.
I repeat: if we fail to overcome the immense talent shortage, the European tech scene will lose out. We have already lost out here in terms of funding from European backers for scale-ups.
Equity cannot wait any longer, there needs to be simpler rules for start-ups instead of the cumbersome and bureaucratic workaround. Ideally, the opportunities and rules should even be harmonised across the EU. Because last but not least, different tax legislations prevent the practical implementation of investments in companies that, like us at Bitpanda, operate in several countries. In all of this, we need to think in terms of the technology and internet age, three times over. Otherwise, the battle for talent between EU countries will intensify massively, and we cannot want that. We have to start thinking globally in a global competition. At the moment, we are not even thinking European, but still national.
Eric Demuth, 34, was born in northern Germany, lives in Vienna and founded Bitpanda there in 2014. Every two months, he shares his views on current topics from the start-up world.
FYI: English edition available
Hello my friend, have you been stranded on the German edition of Startbase? At least your browser tells us, that you do not speak German - so maybe you would like to switch to the English edition instead?
FYI: Deutsche Edition verfügbar
Hallo mein Freund, du befindest dich auf der Englischen Edition der Startbase und laut deinem Browser sprichst du eigentlich auch Deutsch. Magst du die Sprache wechseln?