Why these 4 Boston startups chose to give their employees equity

by Justine Hofherr
February 22, 2017

Many who join tech startups are looking to take on more responsibility and innovate for the future. Or perhaps they're drawn to startups’ notoriously fast-paced work environments and flexible schedules.

When it comes to creating a sense of shared success at a young company, equity is often cited as one of the most significant perks of working at a startup. Potentially owning a piece of a multi-million or billion dollar company is obviously attractive to many job-seekers, but equity packages can be tough to navigate and vary widely among companies.

We caught up with four Boston-based tech startups who offer equity to employees to better understand what it means to own a portion of a growing company.

 

 

CloudHealth Technologies gives organizations the tools to visualize and automate their cloud environments. Their cloud service management platform integrates with services across the datacenter and cloud, letting startups and service providers access a hub of data analytics.

Responses via Larry Begley, CFO

What does it mean to offer equity as a perk?

There are many great benefits to life at a startup: you’ll join a core team where you can quickly make an impact, and work alongside true innovators. From a company size perspective, CloudHealth Technologies is beyond the startup phase and has entered the ‘scale-up’ period, but we still want to empower employees to feel like they’re invested in the continued success of this company — and that’s exactly the signal you send when you offer equity.

What are the advantages for the employees?

Simply put, you get a stake in the business and, assuming your company has a successful exit, you financially benefit from its growth. As our CFO Larry Begley says, having stock options is a “wealth creation opportunity; equity also has tax advantages if an employee can take advantage of long-term capital gains tax rates on any appreciation in the value of their stock.” This “wealth creation opportunity” can be especially appealing to younger employees, who may have school debt yet must contend with the cost of living in Boston.

What are the advantages for the company?

There’s a lot of top talent here in Boston, and competition for that talent among employers is steep. Equity helps to both attract and retain top talent. It can also reduce turnover, as employees have a financial incentive to stay and continue to vest their options.

Equity establishes a different mindset. To quote Larry again, “It makes everyone an owner,  not just an employee, and creates teams that are deeply invested in the future of the company.”

What advice do you have for early stage startups that are flirting with the idea of offering equity?

Our leadership team consists of serial entrepreneurs with decades of startup experience. Their advice? “Spread the wealth.”

 

 

 

PatientPing connects health care providers across the country with real-time notifications and care guidelines whenever and wherever their patients receive care.

Responses via Catherine Jussel, People Operations Lead

What does it mean to offer equity as a perk?

Offering equity means sharing in the risk and reward of building a company with employees.

What are the advantages for the employees?

Ideally, the more successful the company becomes, the more valuable equity becomes.

What are the advantages for the company?

Offering equity to employees is a great way to keep them engaged, motivated and focused on company goals.

What advice do you have for early stage startups that are flirting with the idea of offering equity?

Develop a one-pager that clearly outlines what equity means for employees. Not everyone understands what to do with their options, how vesting works, or what happens if the company raises another round of financing. Having this information readily available to employees not only acts as a reminder that equity is a piece of compensation, but also encourages a culture of learning and transparency.

 

 

 

Crayon uses artificial intelligence to help marketers gain insight by tracking more than 36 million pages across 4 million companies. 

Responses via Ellie Mirman, Chief Marketing Officer

What does it mean to offer equity as a perk?

While a perk might be a fun, optional feature of working at a company, like free beer or flexible schedules, equity has become a key form of compensation at high-growth companies. Equity packages are a great way to get all employees bought into the growth of the company — aligning incentives across the whole team. Building and scaling a high-growth company can be quite challenging, but knowing that you have a stake in the company's long-term success can help you push through those challenging times. Equity is also the kind of perk that can unify the team to solve for enterprise value, not worrying about "is this in my job description" and instead focusing on doing what needs to get done. If the team is successful, they have a shot at seeing an outsized result.

What are the advantages for the employees?

For employees, equity packages allow them to have a stake in the company's long term success. All of that hard work is not only rewarded with compensation today but with a potential for outsized returns in the future.

What are the advantages for the company?

For the company, equity packages are great at getting buy-in from employees to put in the necessary hard work, and keeps them focused on the long-term success of the company. Equity packages can help balance out compensation packages, especially for startups that may be more cash-strapped. This can also help attract and retain employees who have the right motivations — not interested in jumping in for a quick cashout but rather are interested in building a big successful company.

What advice do you have for early stage startups that are flirting with the idea of offering equity?

In today's competitive, candidate-driven tech job market, it's no longer a question of whether or not to offer equity packages, it's how aggressive those packages should be. More and more, candidates are expecting equity packages and asking questions about the stock plan, terms, etc. Be prepared to have those conversations, be prepared to educate workers newer to tech startups on how equity works, and remember that, most of all, equity is a great way to align incentives from the front lines to the top executives.

 

 

 

Acorio is a consulting firm that helps companies identify and deliver IT service management efficiency and cost savings.

Responses via Ellen Daley, CEO

What does it mean to offer equity as a perk?

It means each employee has an ownership of the company. So often, building a company takes really talented people doing extraordinary things for the client and each other. It’s more than just a job. Equity is a reward for that.  

What are the advantages for the employees?

I think a sense of shared ownership; we’re a family in that we all have a stake in the company. Of course, there is also the promise of monetary value later down the pike (at least for a start-up).  But even if that does not materialize, the act of everyone having a ‘piece’ creates a much-shared sense of camaraderie – at least that’s what our employees tell us.

What are the advantages for the company?

The company gets that extra push on the work ethic and collaboration. I think it also makes happier employees, which means happier customers as they translate that enthusiasm to our clients.

What advice do you have for early stage startups that are flirting with the idea of offering equity?

Do it.  What you are about to do is extraordinarily hard and requires your early-stage employees to wear many different hats, and will stretch them in ways that are uncomfortable. Equity is a glue that helps bind everyone toward a common purpose.

 

 

Some responses have been edited for length and clarity. 

Photos via social media

Know a company with a great story? Let us know or tweet us @BuiltInBOS

 

Boston startup guides

LOCAL GUIDE
Your Guide to the Best Tech Companies to Work for in Boston
LOCAL GUIDE
Inside the Best Software Engineer Jobs in Boston
LOCAL GUIDE
Tour the Coolest Tech Offices in Boston
LOCAL GUIDE
Inside the Best Sales Jobs in Boston
LOCAL GUIDE
Your Guide to the Best Perks at Boston Tech Companies
LOCAL GUIDE
Your Guide to the Boston Startup Community
LOCAL GUIDE
Top Boston Startup Funding Rounds
LOCAL GUIDE
Your Guide to Edtech Tech in Boston
Developer Jobs
View 510 jobs
Design + UX Jobs
View 71 jobs
Marketing Jobs
View 125 jobs
Product Jobs
View 88 jobs
Sales Jobs
View 187 jobs
Data Jobs
View 90 jobs