Managing startup equity can be overwhelming for busy startup founders. There is a lot of moving parts involved in managing and distributing startup equity, which can easily get overwhelming, 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 guide, we will unpack the essential things you need to know when looking for an equity management software, including 17 equity management tools in the market today.
What is an equity management software
Equity management software is a tool designed to help companies manage their equity-related tasks. It's a tool that automates equity plan administration, cap table management, compliance reporting, electronic securities transactions, tax and accounting integration, and more.
Essentially, it's a centralized platform that provides real-time data and insights into equity-related activities, making it easier for companies to manage their equity.
Typically, an equity management software comes with a cap table or ESOP (Employee Stock Ownership Plan) components.
- 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 that are important to raising capital. Learn more about cap tables.
- An ESOP management software handles all the calculations and processes involved in issuing equity grant agreements and stock certificates to employees, maintaining legal compliance, and keeping track of vesting schedules and buyback plans. Employee stock options and advisory shares are some of the common equity grants startup founders issue, and and a good equity management software can handle all of that.
Some softwares are focused on cap table management only, others on equity management. There are softwares that allow you to conveniently manage your cap table, issue equity grants, conduct valuations, model scenarios, 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.
From spreadsheets to software
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 equity programs (like employee stock options) 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
Just like most admin tasks, equity management becomes more tedious as your team grows. With so many components to keep an eye on, it's simply impossible for a busy startup founder to be on top of things. If you believe that equity matters in all stages of growth, you will absolutely benefit from having an equity management software. Let's count all the ways it benefits you:
Increased efficiency and accuracy
One of the most significant benefits of using an equity management software is increased efficiency and accuracy. With manual equity management, there is a higher chance of errors, which can result in compliance issues and legal disputes.
An equity management software can automate many equity-related tasks, such as equity plan administration, cap table management, and compliance reporting, reducing the risk of errors and saving time.
Transparency and compliance
Transparency and compliance are essential aspects of equity management. An equity management software provides transparency into equity-related activities, making it easier for stakeholders to understand and track their equity. It also ensures compliance with regulatory requirements, such as SEC regulations and tax laws.
Access to real-time data
An equity management software provides real-time data and insights into equity-related activities. This data can help companies make informed decisions about equity grants, options, and other forms of equity-based compensation. It also provides insights into the company's ownership structure, allowing companies to identify potential issues and opportunities.
Easy communication and collaboration
Equity management involves communication and collaboration between various stakeholders, such as employees, investors, and legal counsel. An equity management software provides a centralized platform for communication and collaboration, making it easier for stakeholders to work together and share information.
Cost-effective
Using an equity management software can be cost-effective in the long run. It reduces the need for manual labor and minimizes the risk of errors, saving time and money. It also reduces the risk of compliance issues and legal disputes, which can be costly for companies.
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 employee stock option plan?
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 comply to laws and taxation, or as early as seed A+ funding where investors have to be added into your capitalization table.
Criteria
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.
Global focus
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.
Affordability
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.
Equity management software features to look for
Automation
An equity management software should automate the administration of equity plans, such as stock option plans (ISO, NSO) and/or advisory shares. It should also be able to handle the administration of various types of equity plans, from startup to IPO and beyond.
Cap table management and modeling
An equity management software should ideally provide cap table management capabilities, allowing companies to manage their equity ownership structure or do cap table modeling. It should also be able to handle complex cap tables, such as those with multiple rounds of financing and various equity classes.
Compliance
An equity management software should provide compliance reporting capabilities, allowing companies to comply with regulatory requirements. It should also be able to generate reports on equity grants, exercise activity, and other equity-related activities.
Tax and accounting integration
An equity management software should integrate with tax and accounting software, allowing companies to manage the tax implications of equity compensation. It should also be able to generate tax reports and handle tax withholding.
Capital raising tools
An equity management software should help simplify capital raises, legal workflows integrated within platform, and investor communication and transparency.
Top equity management software in 2023
With those key features in mind, these are the ESOP management tools you'll likely see in your search, and worth your consideration. Depending on your growth stage, company size and/or budget, hope this list helps you find the right software for your unique needs.
Carta
Let's start with the most established and popular one, Carta. One of the leaders in this industry, Carta is a trusted brand that offers a comprehensive platform for equity management, fundraising, and compliance solutions for companies of all sizes. However, its plethora of features and tools may not all be necessary for startups in early stages, making it a lot more complex for new founders and smaller teams.
- 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 may be 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, 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 Equity
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 per month past 10 shareholders, $300/month for series a, goes higher for series b & c
Pulley
Pulley offers equity management platform, including cap table management, 409A valuations, and employee equity plans. Its pricing is relatively affordable, with a simple and transparent pricing structure. If you wish to issue equity grants outside of the US, Pulley might not be the software for you as it is currently available for US-based teams.
- 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
Shareworks
- 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
Orchestra
- 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
SeedLegals
- 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
Capdesk
- 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.
Vestd
- 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
Cake Equity
Cake has a mission: To make it fast and simple to give equity to employees.
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!).
This industry is often slowed down by enterprise products with long sales cycles. Not Cake. You can sign up and build your cap table and set up a stock option pool today for free.
Global focus
Cake is an equity management tool that's truly global. It's flexible enough to accomodate stakeholders from 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.
Affordability
Most equity 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 pricing tears are startup-friendly and scales with you as your business grows.
Streamlining your capital raise
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 an equity management tool that's built by founders for founders. And because of this we have great empathy for busy startup teams and made it our mission to help and empower them to build amazing companies through equity, across borders.
Quick-fire Q&A
ESOP management software FAQs
What is ESOP management software?
ESOP management software is a type of software that helps companies manage their employee stock ownership plans (ESOPs). It provides features such as equity administration, vesting schedules, tax compliance, and reporting.
Who can use ESOP management software?
ESOP management software is suitable for public and private companies of all sizes and industries.
What are the benefits of using ESOP management software?
The benefits of using ESOP management software include streamlining the process, reducing errors, saving time, and ensuring legal compliance.
How much does ESOP management software cost?
The cost of ESOP management software varies depending on the software vendor, the features offered, and the number of users. Some software vendors charge a monthly subscription fee, while others charge a one-time fee.
Which is the best ESOP management software?
The best ESOP management software depends on your company's specific needs and requirements. The software solutions mentioned in this article are among the top-rated in the market.
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.
