Managing equity in a remote organization: lessons from a Ledgy co-founder
As more companies embrace remote and hybrid working models, companies, employees and investors are in the middle of a gigantic recalibration. What will the consequences be for operations, culture and growth? And how can leaders create new processes that scale in a remote-first environment?
These questions are vital for many of Ledgy's customers, and for Ledgy too. We help high-growth companies manage their equity and ownership, but as a scaling startup some of our customers' challenges are also familiar to us. I sat down with Ledgy co-founder and Chief Product Officer Ben-Elias Brandt to understand how Ledgy is adapting to these huge changes.
Ben has been at the heart of Ledgy's growth from our earliest days, including our $10 million Series A funding round led by Sequoia Capital earlier this year. In this Q&A, we'll dig into Ben's thoughts on how to set companies up to scale in the right way, including international expansion, compensation and employee share ownership planning.
Where Ledgy is today
Hey Ben! Ledgy is hiring in several different locations right now which is really exciting. To kick us off, can you speak about how you're approaching equity as Ledgy moves into new markets?
"We're really excited that Ledgy can take advantage of talent across Europe, and one of the positive consequences of an extremely difficult situation with COVID is that borders seem less scary to companies thinking about hiring.
"But when you expand internationally, there are obviously consequences for the way you should structure equity. At Ledgy, we think it is generally best practice to control equity from a topco, where all shareholders and optionholders sit and where equity is distributed from different pools (e.g. for employees, investors, etc). You can then create country-specific plans that help you compare allocations and respond to varying legal and tax requirements in different markets as you continue to grow the team. We have seen several successful examples of this structure first-hand."
International equity
So what principles should guide companies when they are planning to roll out share option plans in multiple countries?
"Equity and ownership can get complex, but I find it helpful to tie everything back to a couple of core principles. The first is that all employees of a growing company should get equity. Then, employees in similar roles and at similar levels of seniority should get the same equity, no matter where they are based.
"We think this makes sense because unlike salary, equity isn't related to the cost of living for employees. Equity usually vests over four years, during which time employees could well move between different locations, especially if they are working in a remote-friendly environment. It also emphasises the fact that all team members contribute to the goal of building a great company, and this alignment of interests should be embraced.
"These principles can support you as you develop more sophisticated hiring and compensation plans in different markets, and we are not shy about recommending this course of action to our customers."
This leads me to another key question: when you're evaluating the equity stakes you offer to different employees, how can you make sure you are being fair?
"This is a very interesting topic! Often, companies will try to make an explicit link between equity and salary: saying, for example, that the share options offered to employees should be worth around 20% of their salaries. This, and many other tips for companies thinking about equity, is covered by Index Ventures in their Rewarding Talent report.
"However, when you are scaling internationally and dealing with team members in different places, this can create inequalities: a software developer in London is likely to have a different salary expectation compared to someone based in Lisbon with a similar level of experience.
"Our advice to customers at Ledgy – and any business managing equity – is to live by the principles I spoke about earlier where people in the same role and seniority get the same equity, no matter their location. This approach acknowledges the differences between markets but is still fair. It also scales more effectively."
The operational side of equity
Speaking of scaling: what processes do we have in place at Ledgy that scale well, and which do you think will need to change over time?
"There is always a lot that needs to change in a growing business! But something I think will work well for us in the future is our overall compensation framework, which we have thought about a lot this year. It has equity right at its heart, and it establishes best practices for decisions like: what happens to an employee's equity when they get a promotion? What about if they ask to sacrifice some salary and have a higher percentage of their total package as equity? At Ledgy, for instance, employees can choose once a year to trade a proportion of that year's salary for an equity grant, which vests over one year. After the year has passed, the salary goes back to normal, unless of course the employee decides to choose a higher proportion of equity again. It takes some work to figure all this out, but we think we now have a strong system in place that will work over time.
"This also helps us deal with market expansion in a more structured way. Once you have entered a new geography, the framework makes it easier to hire new employees and develop team members. Where this may not be quite so successful is if you have a very distributed team with small numbers of people in lots of territories, but most companies will not face this specific issue.
"Another element that we think about is how to communicate with the whole business about equity. For some companies, equity 'office hours' and AMA sessions may not scale well: there could be too many employees seeking to ask different (and personal) questions at different times. The best way to overcome these issues is to focus on documentation: first, have educational material and general principles available for the company to view asynchronously, and also make sure to preserve questions and answers from the sessions. I also think that introducing new team members to equity operating principles as part of the onboarding process makes a big difference in improving understanding over the long term."
Very interesting points! And finally, what role do you think equity will play at Ledgy in terms of company culture as we grow?
"Equity is a critical way for the whole team to align around our mission and on the work we do every day. Keeping equity front of mind for our team demonstrates that working at Ledgy is about more than just showing up: we can all be part of building a great business and everyone will be fairly rewarded for the effort they put in.
"I think equity becomes more important in a remote context because it's vital to show the team, our investors and other stakeholders that we are applying our operating principles consistently and fairly."
Thanks for your time Ben!
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