Saturday, April 1, 2023
HomeValue InvestingHow It Works, Professionals & Cons

How It Works, Professionals & Cons

Many workers of privately held corporations obtain inventory choices as a part of their compensation. That is significantly widespread with startups. Choices provide the proper to buy inventory, often at a reduction, for a restricted interval. However what if you happen to don’t find the money for to purchase earlier than the deadline?

It is a quite common drawback. An estimated 76% of workers with inventory choices by no means train them, actually because they aren’t prepared to take the danger or simply don’t have the money[1].

If you happen to’re on this state of affairs, Equitybee could assist you get hold of the financing it is advisable train your choices. It might probably additionally successfully remove lots of the dangers of exercising personal firm inventory choices.

What’s Equitybee?

Equitybee places startup workers involved with accredited buyers who may also help them train their inventory choices. Equitybee has a world community of certified buyers who could also be prepared to fund your inventory buy in alternate for a share of their eventual worth. 

Equitybee has participated in additional than 4,000 financing offers in 600 startups worldwide.

💡 Tip: The proportion of your inventory worth you need to give to buyers isn’t printed prematurely. You’ll obtain a customized supply from buyers.

EquityBee homepage

How Does Equitybee Work?

Equitybee features in a simple method. Here’s a rundown.

  • If you happen to can’t afford to train your choices, you fill out a funding request on the Equitybee web site.
  • If Equitybee decides that can assist you fund your inventory buy, it distributes the deal to buyers.
  • If an investor needs to fund your inventory choices, you obtain a suggestion.
  • You settle for or reject that supply.
  • If you happen to settle for the supply, the investor supplies the funds to train your choices.
  • When there’s an “exit occasion” – often when the corporate goes public, merges, or is offered – the investor takes a share of the income.

The proportion paid to the investor will depend on the precise supply, however the investor at all times assumes all dangers. If there is no such thing as a exit occasion, the shares fall in worth, or the corporate goes out of enterprise, you owe nothing.

What Does it Price?

There are prices for workers and buyers.

Worker Charges

There isn’t a set charge. An investor will make you a suggestion and every supply is completely different. Buyers compete for your small business, so the phrases could also be engaging to you, particularly if you happen to work for an organization with a excessive degree of investor curiosity.

There are two prices to the deal. You’ll comply with pay curiosity, and you’ll comply with pay a portion of the inventory income.

Curiosity may be as little as 1%, however it might vary greater relying on the supply.

You must count on to surrender anyplace from 25% to 50% of the eventual income. Once more, this varies with the supply.

You’ll solely pay if there’s a profitable “exit occasion.” An exit occasion may be an acquisition, merger, or preliminary public providing (IPO). These will let you promote your shares. You may as well promote your shares while you depart the corporate. 

💡 Tip: You might have a restricted time to train your choices after you permit an organization. If you happen to suppose you might be utilizing Equitybee, it is very important contact the corporate properly earlier than your choices expire.

Investor Charges

Buyers pay 5% of the funding worth when the transaction begins. When the shares are offered, and the worker pays the curiosity due, Equitybee expenses 5% of that quantity as properly.

Equitybee Professionals & Cons


Advantages for Staff

Listed here are a few of the the reason why workers select to make use of Equitybee.

  • Getting Inventory When You Can’t Afford It The first profit is that you may train your choices to purchase the inventory even if you happen to don’t have the cash. That is significantly better than permitting your choices to run out and shedding the chance.
    You’ll pay a portion of your features to the investor, however if you happen to don’t train the choices, there will likely be no features in any respect.
  • Decrease Threat – Exercising a private-company inventory choice entails danger. The corporate may by no means go public or be acquired, so there may by no means be a marketplace for the shares. The corporate may even exit of enterprise, leaving the shares nugatory.
    If you happen to use your individual cash to train your choices, your losses could possibly be substantial.
    Choices funding with Equitybee is a “non-recourse” deal. Meaning if your organization fails or the inventory worth goes decrease than the worth you might be provided in your choices package deal, or an exit occasion by no means happens, you don’t owe the investor a reimbursement.
    You lose some potential revenue, however you nearly utterly remove danger.

Dangers for Staff

You’ll have to surrender a good portion of your income while you promote your shares. This may be as a lot as half of what your make.

You could promote sufficient shares to pay the investor as quickly as an exit occasion happens. If you don’t, Equitybee could provoke authorized motion to power compliance.

Advantages for Buyers

Accredited buyers have their very own causes for working with Equitybee.

  • Entry to Privately Held Firms – It’s not simple to purchase shares in privately held corporations. There are personal fairness marketplaces, however there’s by no means any assurance that shares in any given firm will likely be accessible.
    Worker inventory choices are one of many few dependable sources of personal firm shares, and since buyers don’t technically personal the shares, no firm approval is required.
  • Lowered Costs – Inventory choices sometimes supply shares at costs under the Firm’s formal valuation. That offers buyers a possibility to accumulate shares at a horny worth.

Dangers for Buyers

Investing by means of Equitybee has dangers, a lot of that are widespread to any personal fairness funding.

  • Excessive Minimal Funding Quantity The minimal funding quantity for EquityBee is $10,000 or extra.
  • No Possession – While you make investments by means of Equitybee, you don’t personal the shares, even after a liquidation occasion. That’s a bonus in some methods: the corporate doesn’t must approve the transaction. It additionally limits your rights.
  • Excessive-Threat Funding – Investing in privately held corporations is a high-risk endeavor by any customary. There isn’t a assurance that the corporate will succeed or that there’ll ever be a marketplace for the shares.
  • Potential for Full Loss – If the startup by no means has a liquidity occasion, you will be unable to withdraw or liquidate your funding. If the corporate fails or goes bankrupt, you lose your funding, and the worker you helped doesn’t must reimburse you.

Getting Began with Equitybee

Right here’s what you’ll must do to us Equitybee.

For Staff

  1. Evaluation the necessities for workers.
  2. Click on on “Signup” within the high proper nook of the house web page and get began by registering as an worker.
  3. Present Equitybee with fundamental details about your self and your inventory choices. 
  4. Obtain an assigned Fairness Success Supervisor that may clarify the funding course of and reply your questions.
  5. Present a inventory choice grant discover.
  6. Present a replica of your choice plan.
  7. Present proof you might have the proper to train the choices.
  8. Submit your utility.
  9. If a profitable match is discovered, you and the taking part buyers signal an settlement laying out the phrases of the funding.
  10. Present your share choice project discover, choice plan, and proof of your acquired choices.
  11. After you have acquired funding, present proof that you’ve exercised your choices.

You may be the proprietor of the shares. They continue to be in your identify. When you promote them, you’ll give a few of the worth (in money) to the buyers.

Worker Necessities

  • You could work for a non-public company that points inventory.
  • You want to have inventory choices which can be value a minimum of $10,000.
  • You could be capable of cross a background and credit score verify.

Keep in mind that Equitybee wants to make sure it provides high quality alternatives to buyers, so present all data that may give them confidence in your deal. Not all corporations will likely be accredited.

For Buyers

Equitybee requires that buyers meet the SEC’s accredited investor requirements. If you happen to meet these requirements, contact Equitybee on to register as an investor and evaluate accessible investments.

Investor Necessities

You should be a certified investor to spend money on Equitybee. Because of this you need to meet a number of of the {qualifications} set out by the U.S. Securities and Trade Fee (SEC):

● Have earned greater than $200,000 yearly in every of the final two years and count on to earn the identical quantity within the present yr.

● Have a internet value of greater than $1 million (excluding your private home)

● Have sufficient proof of coaching or particular skilled certifications, corresponding to FINRA Collection 7, 65, or 82.

You could additionally make investments a minimum of $10,000 to take part within the financing of inventory choices. That is the Equitybee minimal funding.

Equitybee Options

Equitybee isn’t the one personal fairness market. Contemplate these options.

EquityZen and Forge International are extra oriented towards inventory consumers, whereas SecFi and Liquidstock serve workers looking for funding to train their choices.


EquityZen is a web-based marketplace for the shares of pre-IPO workers of personal corporations. 

The platform connects workers of personal corporations to buyers who would in any other case be unable to spend money on the corporate earlier than the IPO. You could personal the shares you promote, so you need to train your choices earlier than making a deal.

Forge International

Forge International is the world’s largest personal fairness market. It permits accredited buyers to purchase and promote shares in personal corporations. Forge International handles precise purchases of inventory. They don’t fund choices.

Because of this workers should train their choices and personal the inventory earlier than they will promote it by means of Forge International. Transactions should be accredited by the corporate issuing the shares.


SecFi supplies a variety of companies to buyers, corporations, and workers. One among these companies is inventory choices funding. The deal is very similar to what Equitybee provides: you’ll personal the shares, and any return to SecFi happens after a liquidation occasion.

SecFi’s web site doesn’t focus on gross sales of personal fairness shares to buyers.


LiquidStock works very very similar to Equitybee, besides that they don’t match you with an investor. As an alternative, Liquidstock funds your inventory choices immediately. Additionally they present training about inventory choices that can assist you perceive your selections extra totally.

LiquidStock manages its personal capital pool and doesn’t promote personal firm shares to buyers.

Is It Value It?

For workers who can’t afford to train choices, it is a state of affairs the place one thing is healthier than nothing. If you will lose your choices as a result of you possibly can’t afford to train them, Equitybee offers you a minimum of a share of the income whereas minimizing dangers.

That’s clearly value it, although it is likely to be value exploring competing companies as properly to see who provides the perfect deal. Funding inventory choices is sophisticated, so make sure you perceive the method earlier than pursuing a deal.

For buyers, it’s a extra sophisticated query. You’ll must pretty consider the dangers, your danger tolerance, and the potential for revenue and loss to determine whether or not such a deal is suitable for you.


We evaluated Equitybee primarily based on these standards:

  • Reliability – The corporate has a observe file and brokers offers successfully. We significantly like the truth that buyers should be certified.
  • Profitability – We checked out whether or not an choice holder may fairly revenue and located the corporate’s phrases engaging. We additionally evaluated the potential for buyers and decided that, although it is a high-risk alternative, it might make important cash.
  • Ease of Use – The platform is fairly easy. As a result of every worker is assigned an Fairness Success Supervisor, the method is clear.

We didn’t discover important numbers of buyer evaluations on any dependable evaluate web site, so buyer evaluations will not be included in our analysis.


Is Equitybee a Authentic Firm?

Equitybee is a reliable fintech firm that has helped greater than 1,700 startups to train their inventory choices. The platform has dealt with shares in corporations together with Airbnb, Affirm, Coursera, Payoneer, 23andMe, and Compass.

What Share Does Equitybee Take?

Equitybee brokers deal between buyers and personal firm workers who search financing to train their choices. The phrases of every supply are completely different, however you possibly can count on to pay an rate of interest of 1% or extra and pay 25% to 50% of the eventual proceeds to the investor.

When Ought to I Train Inventory Choices?

Your choices grant will offer you expiration dates. You could train the choice earlier than the expiration date.

What’s Equitybee’s Minimal Funding

Equitybee’s minimal funding is $10.000.



Please enter your comment!
Please enter your name here

Most Popular

Recent Comments