A number of leading tech entrepreneurs, including Stripe co-founder and chief executive Patrick Collison, are urging European policymakers to reform the rules around granting shares to employees.
The entrepreneurs say that Europe has the potential to become the world’s most entrepreneurial continent. However, they say the limited availability of talent is a serious bottleneck to growth, with differing rules on share options making the sector uncompelling.
In an open letter to be sent out to politicians in early January, Mr Collison and others say that a lack of harmonisation on share options is making the European tech sector considerably less attractive, particularly when compared to Silicon Valley.
Some 30 tech entrepreneurs have added their name to the open letter, which is being published online on Wednesday with a view to encouraging more business leaders to add their name to it before it is sent on to policymakers early in January.
The signatories include well-known entrepreneurs such as Nikolay Storonsky of Revolut, IIkkla Paananen of Supercell, Taavet Hinrikus of Transferwise, Nicolas Brusson of BlaBlacar and Niklas Östberg of Delivery Hero.
They are calling on legislators to fix what they describe as “the patchy, inconsistent and often punitive rules that govern employee ownership”.
“Policies that currently govern employee ownership across Europe are often archaic and highly ineffective. Some are so punishing that they put our start-ups 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,” the letter says.
“If we fail to take action we could see a brain drain of Europe’s best and brightest, leading to fewer jobs created and slower growth. That’s why we need to create start-up-friendly employee share ownership schemes to help Europe’s tech sector– its greatest engine of growth, innovation and employment – to succeed and thrive in the global labour market.”
Index Ventures, which is behind the letter, said employee ownership levels vary much more in Europe than in the US. Its research shows employees here typically own much less of the start-ups they work for than their US counterparts, with stock options also typically being primarily for executives.
"The next Google, Amazon or Netflix could well come from Europe, but for that to happen reforming the rules of employee ownership is definitely not optional," the letter says.
Speaking to The Irish Times, Dominic Jacquesson, director of talent at Index Ventures, said efforts to reform employee options in the Republic have improved greatly of late.
"The Irish Government has made the country much more attractive for start-up talent with the introduction of the Key Employee Engagement Programme (Keep) scheme in January. Previously it had one of the worst stock option policies in Europe."
He added that, while the scheme was in no way perfect, it was an important step in making it easier for Irish start-ups to hire and retain talent.
“We are encouraged by the Government’s intention to continue to improve Keep by removing the restrictions on who is eligible and how many stock options can be issued to an employee. If the proposed improvements are implemented Ireland will have one of the more competitive employee ownership policies in Europe.
“As a pan-European fund, we can only hope other European countries will follow Ireland’s lead in recognising the importance of stock options.”