Equitybee is an online investing platform that connects investors with startup employees who need help to raise the funds needed to exercise their employee stock options.
Although many startups offer employees stock options, many employees lack the means to exercise their options. With Equitybee, an employee requests funding from its investor network and in exchange agrees to share a percentage of their potential proceeds upon an exit event. This way employees can become shareholders in the companies they helped build while giving investors the opportunity to access startups.
- Investors looking for a chance to access startups
- Investors looking to invest at past valuations by funding employee stock options
- Investors who don’t mind risk
- Accredited investors
- Fills a definite need in the world of startups and options
- Helps startup employees have a real opportunity to exercise their options
- Gives investors a chance to access private equity in startups at past valuations by funding employee stock options
- Only available to accredited investors
- Funding employee stock options and not purchasing shares outright
Equitybee Ratings at a Glance
What is Equitybee and How Does it Work?
When a startup has a successful initial public offering (IPO), early shareholders have the potential to profit, sometimes significantly. The possibility that a startup will get to this stage is a huge selling point for working at a startup in the first place - and why employees want stock options included in their compensation packages. However, the devil is in the details when it comes to whether or not employees get rich off of their options if their company makes it big.
Employee options only give the employee an opportunity to become a shareholder in the company they helped build. However, if the employee can’t afford to exercise their options, they might end up having to walk away becoming a shareholder, instead of profiting from the potential success of their company after an exit.
The founders of Equitybee are tech sector and startup veterans who have seen this scenario play out many times. They started Equitybee to put an end to this problem in a creative way: the platform allows startup employees to receive funding of their options in exchange for a portion of their future proceeds.
An Equitybee investor sees this offer and decides to fund the entire package or [the chosen number of shares] at [a particular offer price]. As a high-level overview, the investment process looks like this:
- The investor wires the initial investment amount plus the 5% fee
- As mentioned, Bob agrees to pay 30% of the future value of the shares and x% in annual interest to the investors
- Bob’s company takes 3 years from the time the investor funds the options to the time it IPOs at [whatever the IPO price is]
- After a successful IPO, Bob receives the proceeds of the stock option [the number of shares multiplied by the stock price. As a result of his funding agreement, Bob wires the investor their original investment amount plus 3 years of interest. Additionally, Bob has agreed to pay 30% of the total he earned from the IPO.
- After Bob wires 30% of the total proceeds and interest to the investor, the investor pays a 5% fee to Equitybee
- Keep in mind that this is a taxable event for Bob and the investor. It’s wise to consult with a tax professional to seek further assistance.
Without Equitybee, Bob would have been unable to exercise his options and would have lost out on these proceeds! In terms of the investors, without Bob’s options, they would have been unable to access the startup in the first place.
In addition to receiving a portion of the future share proceeds, the investors also receive annual interest on the original investment amount - usually between 1% and 4%. The platform has loads of available offers from high-growth startups, which means investors can diversify their portfolio with an alternate asset class by using Equitybee.
Equitybee’s business model is compelling for both startup employees and investors. In a perfect world, employees would not need to finance their options in this way, but Equitybee offers a unique solution for employees who simply don’t have the means to exercise their options - and without it, they would lose out on potential profit. Because of their helpful, innovative offering, Equitybee has an impressive array of startups from a variety of industries available:
Some examples of high-growth, VC-backed startups that have been available in the past for funding on Equitybee include:
- Malawarebytes
- Zocdoc
- Chime Financial Inc.
- Acorns
- Stash Financial Inc.
- HomeLight
Bear in mind, this is only a partial list! The full range of Equitybee offers is even more impressive, but the fact that it’s got a number of very well-recognized companies available can be very enticing for investors. Any investor presented with an opportunity to access these startups at past valuations should give it a strong consideration. These are 5-star offerings.
The founders of Equitybee cut their teeth in the tech industry, and it’s easy to see that when using the platform. They clearly realized the importance of customer service and they’ve taken great efforts to thoroughly explain the ins and outs of the platform to both employees looking to fund their options and investors looking to fund.
A person who has never heard of the platform and has no idea how to use it can head to the Equitybee FAQ page and get straightforward simple answers to all of their questions. When it comes to platforms like Equitybee, this is basically the first element of customer service. The Equitybee business model is unique, and they want to ensure anyone interested in accessing the private market by funding employee stock options has the right information to get started.
That’s as true about employees looking to raise money as it is about investors looking for opportunities. So, the platform deserves credit for clearing that first — and very critical — customer service hurdle. It also gets a big check plus for its YouTube channel, which offers another medium for general education about employee stock options.
Then, after signup, you are greeted by a real Equitybee employee who will offer to schedule a live chat to walk you through their investment process. This is a great personal touch. You’ve also got a live chat icon in the bottom of the screen that is staffed by an actual person instead of a bot.
All in all, it’s clear that Equitybee has a strong commitment to customer service, and that commitment is evident at all times throughout the process of using the platform. The 5-star rating is well-deserved.
It is practically impossible for an investment platform like Equitybee to operate without having a fee structure. The cost of running the website, conducting the accounting and staffing the customer service team has to be paid somehow, and that’s where investor fees come into play. While it’s never the most pleasant aspect of investing, it’s the very definition of a necessary evil. Equitybee’s fee structure is easy to understand and works as follows.
Equitybee charges a 5% initial fee of the overall investment amount at the inception of each offer transaction. So, an investor who makes a $10,000 pledge to buy shares will pay a total of $10,500 upfront. Equitybee also charges a 5% fee on both the future share value and any annual interest accrued on the investment. The amount paid by investors will fluctuate based on the annual interest and share price of their chosen investment at liquidity.
When you take the time to consider the opportunity Equitybee offers investors, the fee structure is reasonable, which is why it gets a solid 4-star rating in this department.
Equitybee is one of the rare platforms that offers tangible benefits to both investors and employees. The chance for startup employees to become shareholders in their companies - and potentially profit if the company has a successful exit - is a huge benefit. On the investor side, the chance to access private startups at past valuations basically sells itself.
An investor who is unable to access startup investing while these companies remain private gets another bite at the apple through Equitybee. Obviously, there is always a high level of risk involved in startup investing, but the potential benefits here could be significant. Considering that Equitybee’s business model could offer a win-win scenario to users on both sides depending on the nature of the exit event, it deserves 5 stars for user benefits.
Everything about Equitybee seems to be geared toward a positive user experience. The easy signup, the proactive manner in which the team reaches out to investors (or employees) and ancillary resources like its YouTube channel and super FAQ page make using the platform an absolute breeze.
Whether you are an investor looking for opportunities or an employee looking to get funded, using Equitybee will be a pleasant experience. At the same time, the employer and investor take on risks that should be considered before buying in. Even so, it’s a well-designed and well-executed platform that was obviously formulated by people who put a premium on a positive user experience.
Equitybee vs. Competitors
Equitybee’s competitors in the market currently are EquityZen, Forge and Secfi. One difference between them and Equitybee is that Equitybee prides itself on being employee-first.
Every now and then a platform comes along that fills a need in such an innovative way that it’s impossible not to take notice of it. Equitybee is just such a platform. The idea behind it is brilliant in its simplicity, but the execution of the idea is even better.
Linking startup employees who need funding to exercise their options with investors hungry for startup opportunities seems like a match made in heaven. Equitybee not only does that, but it does it in a way that is easy to understand, user friendly and customer-focused.
Any startup employee who lacks the funds to exercise their options would be well advised to take a look at what Equitybee has to offer. By the same token, any accredited investor who can handle the risk of startup investing and is looking for opportunities to start investing in private equity would appreciate Equitybee just as much. Overall, it’s a great platform with tremendous potential to change the way startup employees and investors buy into new opportunities.
Frequently Asked Questions
What percentage does Equitybee take?
Equitybee charges two separate fees. First, investors pay a 5% fee based on the total amount of their initial investment, which means a $5,000 investment would have a total investor contribution of $5,250. Second, Equitybee charges a 5% fee on the share value and the annual interest earned at liquidity. The annual interest rate will vary from offering to offering but usually ranges between 1% and 4%. Plus, there’s the 5% fee upon the investor’s exit.
Is Equitybee Worth It?
The question of whether Equitybee is worth it depends on the investor and how the company performs. Each individual investor must decide whether the upside of a startup they want to access is worth the risk, because an investment could result in a total loss. On the employee side, there is a bit of risk if their options are not funded, meaning they lose valuable time. They must share some of the proceeds, as well. Plus, there are the expenses associated with using the platform, but this is still a good option for employees who wish to exercise their stock options. In the end, if the startup is successful, it can be a win for both parties.