EquityBee snaps $ 55 million for market that connects employees to capital to help them exercise their stock options – TechCrunch
Stock options can offer many potential rewards to employees when their business is doing well, but not everyone will have the funds to fully exercise, that is, buy, the options they want. have. Enter EquityBee, a marketplace where employees can tap into the capital of a network of some 12,000 investors to fund the process. The startup has seen strong growth this year and to continue to develop features on its platform and expand its reach, the company is today announcing equity funding of $ 55 million.
Series B is led by Group 11, with participation from Battery Ventures, Latitude, Local Globe, Greenfield Partners and ICON. The exact valuation is not being disclosed, but Oren Barzilai, co-founder and CEO of EquityBee, said it was in the hundreds of millions of dollars.
The funding comes amid a lot of investor buzz (pun intended) around the Tel Aviv / Palo Alto-based startup: EquityBee raised $ 20 million just seven months ago. And by working on that story, that last round was increased by $ 7 million.
EquityBee fills an interesting, often under-the-radar gap in the world of stock options. Many tech workers – especially those at startups – calculate options as part of their pay (and indeed, when options aren’t an option, it can be controversial). Indeed, in the United States alone, there are today some 6 million employees of startups who have some form of capital.
But in many cases, employees are not able to take full advantage of what they can in terms of options because purchasing them can be expensive.
“The average employee needs $ 140,000 in cash to fully exercise,” Barzilai said. In total, he estimates that there are up to $ 60 billion in stock options each year among startups, but more than 55% of that amount is not exercised each year. “It’s a big sum that they are losing,” he said of the missing employees.
On the other side of the EquityBee market, there is a huge repository of money ready to invest in the startup economy, and those who hold the exchanges regularly look for ways to diversify the way they invest.
” Investors [in the network] get great access to invest in these companies by providing the financing for the options, ”he said. “It’s not a loan, it’s an investment.
The idea is that employees apply for funding on the platform, and investors essentially bid to fund it. Funding can take the form of a union or a single individual. In the case of both the investor and the employee who will get the funds, neither will know a direct identity, although investors will be able to see which company the employee is working for, so theoretically the An investor can apply some judgment to determine if it is a good or a risky bet.
Employees are not required to repay the money until a liquidity event impacts these options, and they only have to repay the principal money, plus the percentage of interest, s ‘they make money on these options. This means that if the stock options end up being worthless, the investor loses money, but the employee owes nothing. If the company has a good exit, the employee repays the financing with interest. But also: if the company only has an average result and an employee gets a certain, but not a large payout on these options, that also triggers a payout for the investor. In other words, none of it is safe, but for employees and investors who are willing to take a chance on options, this is an interesting way to help both parties play in the game. .
So far, EquityBee has found strong traction in the startup investment ecosystem. The capital of its investor network – which includes family offices, funds, high net worth individuals and, increasingly, Barzilai tells me, VCs – has grown 500% year over year. since 2020, and the number of players in this network has increased by 430% – two signs that investors want to get involved. Meanwhile, the number of employees using this network has increased by more than 350% during the same period.
Barzilai said that at present, EquityBee has no formal partnership with the companies that issue the options – “Our mission is to empower all startup employees to participate in the success they’ve helped build, ”he said of his target audience – but he notes that many of them recommend EquityBee in a way. informally to their employees who need financial assistance to exercise their options; and you can imagine EquityBee formalizing some of that as part of a wider range of HR benefits and services that businesses offer.
Indeed, with options continuing to remain a significant force in how startups are built and how employees participate in their employers’ success, there will likely be more improvements to what EquityBee can offer to employees using its marketplace. for funding. Barzilai would not be attracted to future features, but notes that there is an opportunity to provide other types of liquidity – that is, liquidity – to employees against the value of their options, in cases where they might not be getting them any time soon. This is also why we are seeing other startups, like Vested, also emerging to provide other types of services, to these employees to help them better manage their assets. This, too, speaks of the future services EquityBee might also offer.
“After leading EquityBee‘s Seed and Series A, we have witnessed the company’s continued triple-digit growth over the past year. The extraordinary founding team have demonstrated an excellent fit between the product and the market, and their work continues to drift apart. EquityBee as a true market leader, ”said Dovi Frances, founding partner of Group 11, in a statement. “EquityBeeIndustry-defining tech solutions will help millions of tech workers access cash in a marketplace otherwise set up against them. Our decision to increase our investment so soon after our previous round is an easy one and we are delighted to continue to support the company and its unprecedented growth. “