Today marks the fifth anniversary of  Not Optional – the Index Ventures-led campaign to improve stock option rules and improve conditions for employee ownership of Europe’s startups.

Not Optional launched in 2019 with the support of more than 500 CEOs and founders across the continent who, in an open letter, called on legislators “to fix the patchy, inconsistent, and often punitive rules that govern employee ownership — the practice of giving staff options to acquire a slice of the company they’re working for.”

I spoke to Isaiah Baril-Dore at Index Ventures, and various startup founders across Europe involved in the campaign to learn more.

Not Optional’s ranking compares stock option treatment in 20 European countries and four countries outside Europe: the US, Canada, Israel, and Australia. 

Each country receives a score out of 30 for the “friendliness” of its stock option policies, comprising ratings out of five across six contributing factors: plan scope; strike price; minority shareholders and bureaucracy; employee tax (timing); employee tax (rate); and employer taxation.

According to Baril-Dore:

“In our view, we’re halfway there. Over the last five years, 11 countries — UK, Portugal, France, Germany, Austria, Czechia, Spain, Latvia, Lithuania, and Greece — have made positive changes to their equity programs, seven of which are now at or equal to how we think about the US in terms of rating their plan.” 

More than €5 billion has been transferred to employees since 2019. 

With European competitiveness in the spotlight following the Draghi Report, Europe’s three largest economies—Germany, France, and the UK — have reformed stock option policies to match or exceed those of the US.

Germany is the biggest mover in the rankings, climbing to fifth place following reforms passed at the start of 2024 thanks to the introduction of its Financing for the Future Act which aims to make Germany more attractive to startups. 

And it can’t come too soon. According to Christian Wiens, CEO and founder of German company GetSafe:

“Stock options are essential for attracting talent, but Germany’s tax system often turns them into a burden rather than a benefit—a mindset holding Europe back. 

Employees may face nearly 50 per cent tax on paper gains when granted shares, even without selling. Not Optional is pushing for fairer rules, so startups can offer real ownership without punitive taxes.”

In France, the BSPCE stock options scheme was expanded in 2020 to include foreign businesses with employees based in France. Further, the price of BSPCE stock options is no longer based on the company’s VC-determined valuation, increasing the chance of higher returns. 

“Equity is one of the core levers that startups can pull to attract the best talent in the world.” 

Jean-Charles Samuelian-Werve, CEO and co-founder of Alan sees France’s stock option policies as “a game-changer for startups. It’s helped us attract exceptional talent and align everyone’s interests.”

Baril-Dore stressed that “it takes a lot of courage to be one of the early ones because wanting to do the right thing and actually doing it is quite different.

Our ranking system is not just around timing and the level of taxation. It’s alot around planned scope and bureaucracy, which allows Equity to be granted not just to a few select executives but more broadly to employees. 

Equity is one of the core levers that startups can pull to attract the best talent in the world.” 

Five years ago, European employee ownership at late-stage startups averaged 12 per cent, compared to 20 per cent in the US, but today stands at 16 per cent and rising. 

The UK maintains its lead among large European economies – although changes to Capital Gains Tax rules expected on 30 October could negatively impact its ranking. 

Aneesh Varma, co-founder at UK team-building software startup ARGO, calls startups “a crazy unwieldy machine to build.”

“So if there is anything that can simplify the cognitive load that founders are dealing with while building a company, that’s only going to help build better companies. One less complexity. 

And that’s one of several things that can help Europe build better companies that can be market leaders in their category. That’s the prize.”

Fragmented policies holding European tech ecosystems back

Despite these achievements, low rankings for countries such as Ireland, the Netherlands, Finland, Sweden, and Switzerland highlight the need for further reform. 

Sabrina Maniscalco, CEO and co-founder at Helsinki-based Agorithmiq believes that a more cohesive approach to investment process and simplified cross-border operations, including a unified employee stock options framework, would have numerous benefits to EU employees.

“Enterprise Management Incentives (EMIs), for example, are available in the UK but not in Finland. When it comes to attracting top talent in the tech space, the simplicity and benefits of a less fragmented approach to issues such as these in the US is appealing.”

Sebastian Knutsson, co-founder of Sweden-founded company King, said: 

“It’s concerning to see Sweden and other Nordic countries falling behind in the rankings, especially given our region is a tech powerhouse.

As we compete globally for the best talent, we can’t afford to put our startups at a disadvantage.

Without competitive stock option policies, we risk losing the edge we’ll need to build the transformative companies of tomorrow.”

Mārtiņš Lasmanis is the co-founder and CEO of Supliful, a Latvian company now headquartered in the US. Itäs stock option is built into its US entity, and he admits, “Honestly, I don’t even know how the stock option regime works or operates in Europe or Latvia”. 

The company, however, ensures that “all team members out our company receive stock options, depending on their role and seniority, the amount of stock options changes. But at the same time, I’m a strong believer that every team member is important. 

“There are no small roles in the company, even the people who clean our offices, if they’re on payroll, will receive stock options. 

We want to make sure that everyone’s vested in the organisation.”

However he admits that in reality, stock options, “especially in the Baltics, and even a bit in the USA, are a bit abstract. Because no one really has the experience of a company going public, or being sold, and everyone benefiting.” 

However he also shared plans for secondary liquidations of stock options.

“So all the team members don’t need to wait for some mythical exit or acquisition. That way they can sell off some of their options at some mid-level liquidation point.

For example, when we reach a 100 million valuation, team members can decide to sell some of the business shares. 

They could sell off, say, 10 per cent of their stock options, at a discounted valuation, for example 90 million, at the secondary fund, and so investors could buy these secondary shares from team members.

So that’s another mechanism we’re using to make sure that people stay motivated.”

Furthermore, the wide variation in policies across Europe continues to lead to fragmentation, making it challenging for startups to expand across Europe and hindering startups’ ability to scale.

According to Baril-Dore:

“Entrepreneurs have been discussing this for years. Not Optional has worked hard with local startup associations and founders to improve local legislation.”

Most recently, Not Optional joined the EU Inc. campaign to introduce a single, pan-European entity that would introduce a unified employee stock options programme

Stock options now on the EU agenda

Today, unlike five years ago, stock options have become a prominent focus across EU institutions. The Startup Nations Standard, endorsed by 26 countries, has prioritised this issue.

The European Commission has established a Stock Options Working Group, while the European Securities and Markets Authority has urged the Commission to consider a dedicated EU-wide framework for ESOPs (Employee Stock Option Plans). 

President Ursula von der Leyen recently appointed the European Commission’s first-ever commissioner for startups. 

These developments have sparked hope across the tech and investment ecosystem that issues affecting the ability of Europe’s startups to compete globally – including stock options – could receive more attention from the bloc’s policymakers in the coming years.

This momentum was further underscored by last week’s launch of EU Inc., whose open letter made a compelling case for a pan-European startup entity under the 28th regime, with stock options as a key feature – a move supported by Not Optional.

The full updated rankings can be found here.