European startups worth billions say they will never be able to compete for talent with Google or Facebook thanks to the muddle around employee stock options
- 500 European startups, representing billions of dollars in value, are lobbying lawmakers to reform the rules around stock options.
- They warned of a "brain drain" if Europe can't come up with unified policies to help startups attract the brightest talent to compete with Silicon Valley and China.
- Stock options give employees the chance to buy shares in their company, and help startups compete for talent against bigger companies.
- Europe has yet to produce its own Silicon Valley-style tech giant, and investors and CEOs believe fierce competition for talent is one reason why.
European startup CEOs representing billions of dollars in value are lobbying lawmakers across the bloc to consider reforms to the rules governing employee stock options, so they can attract better talent and compete with Silicon Valley.
Around 500 chief executives from startups such as Stripe, TransferWise, Clue, Supercell, and BlaBlaCar have signed an open letter, which is being sent to European policymakers this week.There are a further 200 signatories from the wider tech ecosystem, such as venture capital investors. Collectively the 500 startups are worth billions of dollars, and the top 12 alone are worth $35 billion.
The letter, coordinated by European investor Index Ventures, argues that Europe's "days of living in Silicon Valley's shadow are over" but said the dearth of talent available to startups threatened the bloc's tech growth.
They wrote that the policies governing stock options are "archaic" and "ineffective."
Stock options are a popular way for startups to compete for the top talent against bigger, richer companies. While startups can't always offer salaries to compete with the likes of Google or Facebook, they can offer stock options. This gives employees the option of buying shares in the startup at a particular price. If the share price booms, that can mean big financial rewards for employees.
But the letter's authors wrote that Europe's policies on stock options vary widely from country to country, putting the bloc at a disadvantage. Some countries have more punitive tax regimes, while others have limits on the size of startups that can benefit from stock option tax breaks.The authors wrote: "Some [policies] are so punishing that they put our startups at a major disadvantage to their peers in Silicon Valley and elsewhere, with whom we're competing for the best designers, developers, product managers, and more."
They warned that Europe could see a "brain drain" of its best and brightest talent, and a slowing of growth.
Jean-Charles Samuelian, CEO and cofounder of French health startup Alan, told Business Insider that US and Chinese startups do so well thanks to the talent they can attract.
"We need to win as a European company, and a stock option plan is one of the best ways to do that. As of today, there is lots of complexity country to country. If you are a foreigner, it's not clear how you will be treated tax-wise," he said.
Alan has around 15 employees from the US, Samuelian said, where there's much greater flexibility around stock options.
"We need a European approach on the topic," he added. "We want to build massive European companies, so a unified system would inform the way we hire, we can build the companies in every part of Europe."