Empowering German Startups

Empowering German Startups

The Association "Bitkom" conducted a survey involving around 150 tech startups in Germany, revealing that 50% of these companies are contemplating implementing employee participation programs. This highlights a growing interest in fostering a collaborative work culture and empowering employees to contribute to the company's success.

It seems that employee participation has emerged as a popular trend among startups. But why is that?

Due to the pervasive shortage of skilled workers, companies are having more and more difficulties in finding employees. companies are increasingly struggling to find employees. What is already difficult for established companies is even more challenging for startups. Startups often lack the financial resources to pay salaries that can compete with larger companies. However, their need for competent employees is just as great. Therefore, it's no wonder that many startups use employee participation to attract talent, while also fostering motivation and commitment to the company.

Employee motivation through ESOP or VSOP?

But what options do startups have to involve their employees?

One common form of employee participation is the so-called ESOP (Employee Stock Option Plan) or VSOP (Virtual Stock Option Plan).

The ESOP enables employees to acquire rights ("options") to company shares in the form of stocks or limited liability company (GmbH) shares. The exercise of the acquired rights is usually linked to a specific time or condition, such as the sale or initial public offering (IPO) of the company. When the agreed-upon time or condition is met, the rights are converted into company shares, and employees can then receive their share of the proceeds as a shareholder in the event of a sale or IPO of the company.

The VSOP is very similar to the ESOP. However, employees do not receive rights ("options") to actual company equity but only rights to virtual company equity. This is a purely contractual agreement that gives employees a payment claim as if they actually owned real shares. The advantage is that companies, unlike with the ESOP, do not need to have authorized share capital approved by a notary to set up a VSOP.

Both forms of employee participation are suitable for startups that are focused on a future sale or IPO. However, lifestyle businesses and companies that do not fall into this category often struggle with traditional ESOPs and VSOPs. Additionally, an ESOP or VSOP is often not designed to involve employees in ongoing profits of a company or to allow employees to sell their payment claims to third parties.

Incentivizing employees easily

Tokenize.it offers founders a less bureaucratic and economically attractive way of employee participation. Tokenize.it digitizes profit-sharing claims of companies by tokenizing them. Tokens can be understood as digital proof of ownership that are stored on a blockchain, making them secure and immutable.

Tokenize.it enables the issuance of digital profit-sharing claims to employees in the form of tokens. Thanks to the clear dashboard, founders always have an overview of the participating employees and their company shares. Pre-made contracts standardize the participation process, significantly reducing bureaucracy compared to ESOP or VSOP.

Tokens can be programmed in such a way that ongoing profit-sharing to employees is possible even without or prior to the sale or IPO of the company. Additionally, it is traceable and fungible.

Tokenize.it is an innovative solution to involve employees in the profits of a company and standardizing the participation process by the use of tokens. This allows founders to reduce bureaucracy, keep track of the process, and provide employees with the option to sell their tokens.

Employee participation will soon be available as a feature of Tokenize.it. To stay informed on the latest updates and developments, sign up for our newsletter today.

Published on

January 15, 2024

Moritz Neven
Moritz Neven

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