90% of angel-backed startups use employee share plans – survey

New Zealand startups are enthusiastic about implementing Employee Stock Ownership Plans – or ESOPs – according to a survey undertaken by the New Zealand Venture Investment Fund and the Angel Association.

The survey was sent to the chief executives of 98 angel-backed companies in NZVIF’s portfolio to gauge their interest in and uptake of ESOPs.  Fifty companies responded, two-thirds of which have been operating for between two to five years and a quarter between six and ten years.

Of the 50 responses, almost 90 percent of the companies had an ESOP in place for their employees, among which 58 percent are software companies and 12 percent are technology hardware companies

NZVIF Investment Director Chris Twiss said the reason that many startups offer employee share ownership plans is that it gives them a greater ability to employ key employees and directors whom they might not otherwise be able to afford or attract.

In addition, share ownership plans can provide a financial incentive to employees to reach predetermined goals and in time, if the company is successful, enjoy the upside monetary benefits of an ownership stake, Mr Twiss said.

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