Startup employees often have in-demand skill sets that could lead to lucrative jobs at established companies. But these employees may forgo those salaries to:
- Be a part of an organization with potential
- Build something amazing
- Obtain early equity
These employees may love their work, but the ability to gain equity may be limited by the ability to participate in an Employee Stock Purchase Plan (ESPP). Employees without adequate cash on hand may opt to forgo stock purchasing options, despite the massive upside potential.
Equitybee is a unique brokerage created to solve that problem. It allows startup employees to request funding for their ESPPs. Investors can fund the request, and they get to participate in the future upside of the stock’s value.
If you’re interested in venture capital investing, Equitybee is one platform worth considering. Here’s how it works.
- Provide funding to startup employees seeking to buy shares through an Employee Stock Purchase Program, and participate in the upside.
- Low “carry” fees compared with other venture capital platforms.
- Help employees get the most value from their compensation package.
5% platform fee, plus a 5% carry fee (if your investment successfully liquidates)
Open to Non-Accredited Investors?
What Is Equitybee?
Equitybee is a unique platform that matches startup employees who can’t afford to buy their company stock with venture capital investors who want to participate in possible startup growth. The company, which was founded in 2018, has helped more than 15,000 startup employees to participate in their company’s Employee Stock Purchase Plan. The company operates in the United States and Israel.
What Does It Offer?
Equitybee gives investors exposure to privately held startup stock when they help an employee buy the stock through an ESPP. The arrangement helps startup employees maximize their compensation while investors gain the possibility of future growth.
Buy The Future Value of Privately Held Stock
Equitybee is a company that helps venture capital investors buy stocks at privately held companies through Employee Stock Purchase Plans (ESPP). If you’re an employee who can’t directly buy stock through an ESPP, Equitybee can help you.
Employees who can’t afford to buy the stock through their ESPP can make a funding request through Equitybee. Equitybee converts the request into an investment opportunity for accredited investors. You don’t purchase the shares, but you enter an agreement to share in the future appreciation of a stock.
Help Startup Employees Get Full Value from Their ESPP
An employee at a publicly-traded company, such as Amazon or Netflix, may be able to participate in an ESPP. But these employees can turn around and sell their shares on the market. Even if they have to wait a year to sell, the shares are very liquid, so most employees can take advantage of the ESPP.
Employees at high-growth startups don’t have the same luxury. The privately held stock can’t be sold on a stock exchange, so employees have to wait for a liquidity event to realize value from their stocks. Startup employees may not be able to afford to keep such a large part of their net worth tied up in private stock, even if they believe in the future value of their company.
Equitybee investors help you take advantage of the ESPP. Investors give you money now, so you can invest in the ESPP. At a future liquidity event, you give the investor a share of the future value. Liquidity events can include acquisitions, mergers, or going public.
Potential to Earn Interest and Enjoy Stock Growth
Equitybee investors don’t own stock. Instead, they own a share of the future value of a stock. If an employee’s company has a liquidity event, the investor receives an interest payment plus a percentage of the growth. The investor and the stock owner can decide whether to settle their arrangement with shares of stock or cash.
High Risk of Loss
You’ll only see a return if the startup has a liquidity event like a merger or going public. Many startups never have a liquidity event. Instead, they may fizzle out over time. Those who buy through Equitybee may invest in multiple companies that never have a liquidity event. These investors will lose their principal investment.
$10,000 Minimum Investment
The minimum investment on Equitybee is $10,000. Some funding requests may be larger than $10,000.
Must Be Accredited To Invest
Only accredited investors can invest through Equitybee. The investments on Equitybee could drop to zero in value, meaning they are illiquid. That makes them inappropriate for typical investors. However, investors with a high income or net worth who want access to high-risk investments may consider Equitybee.
Are There Any Fees?
You need to pay two fees when investing through Equitybee. First, you pay an upfront 5% platform fee whenever you invest. A $10,000 investment will be a $9,500 investment plus a $500 platform fee.
You can also expect a backend fee if your investment successfully liquidates. After an exit, you owe a 5% “carry” fee to the platform. This means you pay 5% of their investment back to Equitybee. For example, if a $10,000 investment turns into $50,000, you’ll make a $40,000 profit. You owe 5% of that profit ($2,000) to Equity.
How Does Equitybee Compare?
Equitybee offers a unique opportunity for venture capitalists to do well by doing good. These investors only gain exposure to high-growth startups, but also help employees at these startups maximize their compensation. The investment opportunities on Equitybee skew “late-stage” meaning they have a good chance of exit.
Equitybee investors have already seen several successful exits even though the company was only founded four years ago. It also has relatively low investment fees. Investors don’t pay an annual fee, and the carry fee is just 5%. Typically venture capital companies charge 20% carrying fees on top of the annual fee.
However, Equitybee doesn’t have the greatest diversity of investment opportunities. Competitors like SeedInvest, MainVest, and AngelList Ventures offer more investment opportunities, and they make it easier to invest.
Open To Non-Accredited Investors?
How Do I Open An Account?
Creating an account with Equitybee is a straightforward process. First, you need to provide basic contact information. Then, you must attest that you meet the standards for accreditation. Finally, you answer some questions about your investment experience.
Once the account is open, you can start exploring the opportunities and create “wish lists” that indicate where you want to invest in an opportunity.
Before formally investing, you must meet with an investor relations manager and confirm accreditation status.
Is It Safe And Secure?
You’ll need to understand Equitybee’s digital security and its investment security to fully evaluate the security of the platform. On the digital side, Equitybee has several layers of security including encryption, employee training, and other info security measures in place. Bad actors may try to steal personal information from the platform, but it is fairly locked down and so far, has not suffered a breach.
Likewise, Equitybee has strong investment security. You may lose money on the platform. Many of the investments on the platform will go to zero. However, those who experience a liquidity event are very likely to see that gain in their bank accounts.
Equitybee has a robust legal structure in place to make sure that employees who buy the stocks and investors who fund the stock purchases are rewarded. If the employee does not comply with the investment rules, Equitybee will pursue legal action on behalf of the investor.
How Do I Contact Equitybee?
Equitybee has a headquarters in Palo Alto, California, and Tel Aviv, Israel. The U.S. customer service number is 650-847-1149. If you have questions you can also email Equitybee through the company’s online contact portal.
Is It Worth It?
You may find profitable investments on the Equitybee platform, but it is currently a relative niche platform in the venture capital investing world. Venture capital investing is a numbers game, and broader exposure typically yields better returns.
Equitybee has high investment minimums and limited investment opportunities. That makes it difficult to develop a diversified venture capital portfolio.
Of course, some investors may enjoy helping startup employees. That may be more rewarding than venture investing. In which case, Equitybee is an incredible platform to gain some exposure to startup stock. Even though investors don’t actually own the startup stock, they get to participate in the upside.
In general, startup stocks are a form of alternative investment. These alternatives should only be a small portion of anybody’s investment portfolio. It is a high-risk investment, but it can boost returns for a well-balanced portfolio.
Must be an accredited investor
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