Equity Data Pulse March 2024

Welcome to your latest Equity Data Pulse. This month we're comparing equity pools in Europe's biggest tech markets, and reviewing what happened to funding rounds and valuations in the first quarter of 2024.

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Q1 sees seed valuations decline but later rounds climb in value

Last year, while the later-stage fundraising environment was sluggish, the earliest-stage rounds generally showed more momentum. So far in 2024, we're seeing something like a reversal of this trend:

While the median valuations in Series B and Series C rounds have consistently grown over the past three quarters, Series A rounds have broadly remained static while the median seed round is actually smaller than in Q3 2023.

Companies are using their equity pools pretty efficiently...

On average, European companies are utilising 93% of the shares or options available to grant in their employee equity pools. The Series A stage is where we observe the 'least efficient' utilisation, principally because this is the stage where investors usually sanction the biggest equity pool expansion:

When employee equity pools are almost used up, the positive is that companies are seeking to incentivise employees as much as they can. On the other hand, a 100% utilised equity pool may not leave room for grants to new hires or refresher grants for existing employees, at least until the next funding round or board meeting where a top-up to the employee equity pool can be agreed.

...but employee equity pools are smaller in Germany than the UK and France

The amount companies decide to allocate to the employee pool dictates how much equity can be offered to new hires and existing employees. The latest data from Europe's major tech markets shows that generally, the employee equity pools set up by German companies are less generous than in the UK and France:

The difference is especially marked at Series D, by which time employee equity pools in Germany are around half the size of those found in France and the UK.

How big should your refresher grants be?

Many companies offer employees refresher grants when they hit milestones like anniversaries or promotions, giving their equity a valuable bump. But many companies are unsure how much to give in a refresher grant. Our Europe-wide data for employees at levels 1-5 indicates that refresher grants are roughly 50% as large as the initial grant:

Refresher grants have to feel impactful for employees, but this means the equity committed through refresher grants can quickly add up. Forecasting can help quantify the impact of expected refresher grants on the employee equity pool.

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