Michaela Jefferson

A scrappy startup with a tiny budget and eagled-eyed investors can’t usually offer its early employees a salary to match bigger and more established businesses, nor the same stability and security. But without the right talent in place, that scrappy startup isn’t going anywhere. So instead, startups incentivise their early employees with equity — a small percentage stake in the company.

Owning shares in the company you work for can be a major incentive to employees looking to join a startup. If all goes well, even a <1% equity stake can end up being worth some serious cash. But, when it comes to selling shares, employees don’t always make as much money as they might expect. Even before cashing out, there can be hidden costs. Equity incentives are subject to tax, and there’s no common framework across Europe — every country has its own systems and laws.

It took Berlin-based digital language learning startup Babbel a few attempts to figure out how to build a team when it started its US expansion journey in 2014. First, cofounder and managing director Thomas Holl sent the entire middle management team from Berlin to New York to set up a new office — that collapsed after just nine months. Holl then tried to hire a local leader in the US to build a team, but struggled to find somebody suitable for the job.