Equity has played a big part in the Australian startup community, but it’s value hasn’t been fully realized by many in the community, especially the employees. As more companies grant more stock options to their employees, Cake is excited to publish its report on the 2024 State of the Aussie Employee Startup Equity.
In this report, we looked at the sentiment of startup teams across Australia to understand and validate how equity plays a role in the startup ecosystem.
We aimed to prioritize an employee’s viewpoint, one of the primary recipients of equity. Many lack awareness of its value, making it crucial for us to gather their insights. Our goal is to empower employers and startup founders with this information, facilitating improved support and more effective equity offerings for a mutually beneficial relationship in the startup ecosystem.
We sent a survey to 200+ startup founders, employees, investors, and people in the startup ecosystem to give us qualitative and quantitative insights that would provide detailed insights crucial for understanding the equity landscape.
Read the full report here to learn the equity sentiment of founders and employees across Australia.
Here are the top highlights:
- 61% of employees find equity as an important factor in accepting a role
- Only 50% of employees know the real value of their equity
- 45% of employees think their employers do not communicate the value of their equity well
- Only 34% of founders think they communicate the value of equity effectively
We asked startup employees how important they think equity is during the hiring process.
61.3% say they find equity as an important factor in accepting a role, 18.2% are neutral about it, and 20.4% don’t see equity as a crucial factor. These results show the impact that equity has in attracting talent.
When asked how motivated they are about their equity, more than half of respondents express feeling highly motivated by it. However, nearly half of the employees still have neutral or lackluster feelings about equity. This correlates with the lack of understanding about its real value.
When asked if they understand how much their equity is worth, 50% of the respondents said they do. Still, half of the respondents are either unsure (14.8%) or outright say they do not understand (35.3%) the value of their equity. There may be many factors that affect this, but one of the most prominent is communication–which is tackled in this report. Many employees generally know that equity is important, but the knowledge they know about it is lacking, as they have very limited access to information.
When asked if they think their company is communicating the value of their equity well, only a third of employees (30.7%) and founders (33.8%) are confident to say yes. Majority of respondents are unsure or straight out don’t think that they do. This shows the significant lack of confidence in the communication within companies regarding the value and importance of equity, and both sides of the coin are aware of it.
Our survey shows that 36.3% of startups issue equity to their global teams. Over the years, equity issuance across borders has increased in popularity and is contributing to culture-sharing and wealth creation. This trend signifies a growing popularity in cross-border equity issuance, reflecting a shift towards more inclusive and globally connected work cultures. Beyond the immediate financial implications, this practice contributes to the sharing of organizational values and fosters a sense of shared ownership among a diverse global workforce. In doing so, it not only promotes a collaborative and interconnected work environment but also plays a pivotal role in wealth creation among employees across different geographical locations.
More than half of Australian startups follow the standard vesting sequence where employees have to wait for a 12-month cliff before they get issued some of their equity. All in all, it takes a total of 36 months for the shares to become fully owned by employees. This practice underscores a deliberate approach to align employee incentives with long-term commitment and performance. The length of this approach not only serves as a retention tool, but also a strategy to nurture a dedicated workforce for startups over several years.
View the full report here
This article 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.