Managing startup equity can be overwhelming for busy startup founders. There is a lot of moving parts involved in managing equity, which can easily , especially with increased growth, new capital raises, and an expanding team of global employees.
An equity management software automates a lot of these processes, and finding the right tool for your business will ultimately save you time and resources and allow you to focus on growing your business.
In this article, we will unpack
- What is an equity management software
- Who uses equity management
- Why do startups need an equity management software
- Types of equity management software
- How to know when you need an equity management software
- What to look for when finding the best equity management software for your business
- 17 best equity management softwares to consider
- Other FAQs on equity management software
What is an equity management software
There are many components of an equity management software. They're often interchangeably referred to as cap table software or an ESOP (employee stock ownership plan) management software because these tools usually go together. However, it's important to note the distinct functionalities of each tool:
A capitalisation table is a document or a system that keeps track of a company's securities, shareholder details (whether founder, investors, advisors, or employees), percentage of ownership, the types of equity grants, legal compliance, and other equity-based transactions.
An ESOP management software is specific to employee stock options. It handles all the calculations and processes involved in issuing employee equity grant agreements and stock certificates, maintaining legal compliance, and keeping track of vesting schedules and buyback plans.
Some softwares are focused on cap table management only, others on ESOP management. And then there are softwares that allow you to conveniently manage your cap table, issue equity grants to advisors and investors, conduct valuations, and manage employee stock pool all at the same time.
It's important to know your requirements both in the short term and the long term so you can choose the right software for your business.
Why is anyone still managing equity manually?
Equity management, like cap table management, often begins with spreadsheets. There comes a point where version control becomes a nightmare and computations become too complex to be managed manually.
Spreadsheets are messy. Their functionality is limited to formulas. It's often impossible to tell when they were last updated — and by whom. And while cloud-based tools like Google Sheets have helped ease this pain point, there is still the extra challenge of manually ensuring that the spreadsheet is up to date.
And the spreadsheet part is only a fraction of the real work. You have legal contracts, and employee offers letters, team culture aspects, tax and compliance reporting. There are better uses of your time as a startup founder, and you want these manual processes automated and stored in a single reliable tool.
Who uses equity management software?
Equity management tools are used by all kinds of businesses
— public and private companies from startups to enterprises. That's because creating and managing a cap table and ESOP is complex and time-consuming, with both financial and legal ramifications. Having the right software streamlines a complex job
— plus, it ensures that your equity and cap table are always legally compliant.
What are the benefits of an equity management software
The benefits you get from an equity software include (but are not limited to):
- Straight-forward cap table creation and management
- Storage and signing for all documents related to your stock options and advisory shares
- A transparent, single source of truth for your cap table, company equity percentages, vesting information, and anything else you, your employees, and other stakeholders might need to know about the company's equity plans.
From a legal standpoint, an equity management software can help ensure your company stays compliant with any regional regulations surrounding your equity plan.
Doing due diligence, completing equity financial reporting, submitting audits, seeking regulatory approvals, and doing annual valuations of your options — these are just some of the requirements (which can vary by where your company and employees are based) for a fully compliant ESOP.
An ESOP management tool or equity management software isn't a law firm, but it should offer tools that help ensure you fulfill whatever legal requirements apply to you, your investors, and your employees.
Equity management software also helps companies, especially startups, secure financing from potential investors. Equity capital doesn’t have legal personal liability and repayment obligations like how loans do. Unlike a loan, the company gives out equity or ownership in exchange for funding—with investors expecting zero obligation of fixed repayments. Besides raising capital, what startups can gain by receiving company funding from investors is worthwhile access to their expertise. Key investors provide great resources to help startups and companies grow their businesses, and an equity management software solution can help streamline the whole process.
How to know when you need an equity management software
We like to think of this question another way: When do you need to raise capital? When do you need to more investors and advisors to your cap table? When do you need an ESOP?
The timing is different for every company. We've seen some startups ditch the spreadsheet and migrate their cap tables into Cake in very early stages, before a fund raising round, or before hiring its first set of employees.
As soon as you decide to hire an employee in a foreign country and you need to coomply to laws and taxation, or as early as seed A+ funding where investors have to be added into your capitalization table.
What to consider when choosing the right equity management software
We believe there are a few key features you need to look for in your equity management software. These are:
Ease of use
It should be quick and easy to build your cap table and get started. Stakeholders should be able to easily navigate a dashboard that gives them all the crucial information they need about their equity, options, vesting schedules, and more. Steps should be streamlined and automated. Legal agreements should be simple and built-in. Expert support should be on hand.
In today's digital world — especially post-pandemic — work is more globalized than it's ever been. A lot of ESOP management tools are focused on specific countries or regions, which can be limiting for companies with remote workers or those that want to open up their hiring pool to talent from around the world.
Unfortunately, you can't pay for your ESOP management tools with stock options. Many companies that need this kind of technology are small and cash-strapped while they direct resources toward growth. Having the right software shouldn't interfere with that — it needs to be affordable.
ESOP management software to consider
With those key features in mind, these are the ESOP management tools you'll likely see in your search, and which are worth your consideration.
Cake has a mission: To make it fast and simple to give equity to employees. It's also the only ESOP management tool on this list that nails all three key features.
Ease of use
Cake allows you to set up your cap table and send your first offer letter in just three steps. All you have to do is:
- Choose a percentage you'd like to share.
- Distribute options among your employees.
- Send out offer letters and get contracts signed, all within the platform.
If you already have a cap table, whether it lives in another kind of software or a spreadsheet, you can import it — and we'll help you set it up to make sure it's perfect (for free!).
The ESOP management tool industry is often slowed down by enterprise products with long sales cycles. Not Cake. You can sign up and build your cap table today for free.
Cake allows for simple, streamlined, and transparent ESOP management. It features a clean, easy-to-navigate dashboard, document storage, and signing, all in one place. It's also a single source of truth that's based in the cloud. No matter who needs to access their equity plan, they can always know they're getting the most accurate, up-to-date information with Cake.
Cake is the only ESOP management tool that's truly global. It's flexible enough to work anywhere in the world, while also handling legal, compliance, and tax matters for any country or region. What does that mean for you? No matter where you're based and no matter where your employees are based, Cake will make sure everyone's equity plans are compliant with all local laws and regulations.
Most ESOP management tools are geared toward enterprise companies, which makes them expensive. Not Cake — our freemium pricing model allows for up to 5 employees on your equity plan, FREE of charge. Our annual rate for customers with 6 to 20 employees is between $350 (basic plan, $29/mo) to $2000 (growth plan, $169/mo).
Streamlining your capital raise
As an added bonus, Cake does more than just manage your cap table and ESOP — it can also help you organize your next raise. Through Cake, you can send offers to investors, store documents, sign paperwork digitally, and access legal help to ensure your raise documents are compliant. It's all cloud-based, fast, and easy. A piece of cake, if you will.
Cake is the only ESOP management tool that's built by founders for founders. Find out how you can share your company's equity — while keeping ESOP management easy as pie.
Carta is a Palo Alto-based fintech company offering valuation software solutions and cap table management. Their technology comes with portfolio insights, transfer agent services, safekeeping, 409A valuations, and equity plan administration.
- Ease of use: Meant for enterprise use, which makes it a more complex product. Not only do you have to speak to a sales team before you can get started — Carta is also difficult to set up and navigate, making it not ideal for startups.
- Global focus: Available in multiple countries (the U.S., Singapore, the U.K., and Australia, just to name a few), but more deeply established in the regulatory, legal, and tax systems in the U.S. Simply put, Carta isn't as flexible — if you're outside of the regions where it's currently available, it may not be the most helpful software for you.
- Affordability: Price starts at $2800 per year and adds up depending on the products and services required, number of security holders, and cap table complexity.
LTSE, formerly CapTable.io, is an equity management company that mainly caters to startups, helping them plan and manage equity, create reports, and maintain records accurately.
- Ease of use: Straightforward, with self- or assisted onboarding available.
- Global focus: Only available in the US
- Affordability: Free to start, $60 months past 10 shareholders
- Ease of use: Straightforward and easy-to-use, with helpful features like a built-in equity calculator to convert percentages to monetary amounts.
- Global focus: Only available in the U.S.
- Affordability: Free trial period up to 25 stakeholders, paid subscription plans range from $1200-$3500 per year
- Ease of use: Geared toward enterprise companies, and requires talking to sales to get started.
- Global focus: Available globally
- Affordability: No free trial, starts at $3 per month
- Ease of use: Relatively straight-forward for self-onboarding. Assisted onboarding is available at an additional cost, which isn't listed.
- Global focus: Only available in New Zealand and Australia
- Affordability: $2 per stakeholder no matter the size of the company, with added costs for certain features
- Ease of use: Straight-forward with self-onboarding
- Global focus: Focus on the UK
- Affordability: 7-day free trial available, up to £999 in annual fee upfront
- Ease of use: More complex, with onboarding process that requires booking a demo and speaking to sales before getting started.
- Global focus: Only available in the EU
- Affordability: No free trial, pricing not easily available; they need to gather personal/company details to quote.
- Ease of use: Requires talking to sales to get started. More complex and time-consuming to set up.
- Global focus: Only available in the UK
- Affordability: 3 pricing tiers ranging from £1,620-£3,780 for the first 10 scheme members, increasing as you add more
The one ESOP management tool that makes equity a piece of cake
There's only one ESOP management tool that's easy to use, truly global, and affordable for companies of all sizes: Cake.
But don't just take our word for it. Cake is easy and free to set up. Get started today.
This blog is designed and intended to provide general information in summary form on general topics. The material may not apply to all jurisdictions. The contents do not constitute legal, financial or tax advice. The contents is not intended to be a substitute for such advice and should not be relied upon as such. If you would like to chat with a lawyer, please get in touch and we can introduce you to one of our very friendly legal partners.