How Capdesk helps Berlin fintech Billie incentivise its employees

Every country takes a different approach to equity. From share types and option pool sizes to government incentives and legal filings, you’d be hard-pressed to find two jurisdictions with exactly the same setup. While employee shares are better understood and utilised in the US, many people would argue that nowhere beats the tax optimisation of the UK’s EMI scheme.

It’s these nuanced needs and expectations that keep the Capdesk team up at night. We’re committed to building a platform that meets the requirements of a UK scale-up just as well as it serves a French seed-stage startup, so every client in a new location (recent additions to the list include Australia and Estonia) presents an exciting challenge.

While breakthrough fintech startup Billie is technically closer to home than our Aussie customers, its Berlin location brings more challenges than you might expect. Notaries feature prominently in the German system, making cap table and shareholder changes paper-based and often burdensome. Against the backdrop of 2020, where in-person contact has become a rarity, relying on the traditional setup could have brought Billie’s employee share plans to a halt. But as an agile and resourceful team, they quickly found a workaround which was supported by Capdesk. Billie’s Senior Legal Counsel Stephan Meyer gave us the full story.

Equity management in Germany

“Here in Germany, we have quite a formal system for managing equity. You have to go to the notary, sit there for some time – especially uncomfortable in times where you'd prefer to be socially distanced – and listen to agreements and shareholder resolutions on issuing and transferring shares being read aloud, even if you wrote these documents yourself. Shareholder lists are officially submitted to and kept within the commercial register. Normally companies rely solely on these public registers to officially track shareholders and numbers of shares. They might also have a hard-copy or a digital folder with shareholder details, and if they are more advanced possibly an Excel spreadsheet. But that’s as far as it typically goes.”

Working around the notary system

As a tech company aiming to go paperless, Billie originally chose Capdesk to digitally display the cap table. But because Billie is committed to rewarding every employee for the company’s success, Stephan soon realised it would be wise to organise phantom shares over Capdesk as well.

“That ended up being our biggest use-case for the platform and has made a real difference. In Germany, whenever you want to issue or transfer real shares the purchase agreement needs to be notarised. The notary then submits the files to the commercial register. A change in the shareholder structure only becomes valid when it’s displayed in the register, so you can’t do it without a notary.

“However phantom shares, unlike options, are a financial obligation rather than official equity in the business, so do not require notarisation. Phantom shareholders are treated as option holders though, in the event of an exit or IPO.”

Taking phantom shares digital

When Stephan joined Billie at the start of this year the company was already using Capdesk, but he spearheaded moving phantom shares onto the platform.

“I was impressed and surprised by how helpful the customer success team was. Our point of contact Sindy was really invested in helping us – she discussed every single detail and walked me through the process. It was a really good experience.

“Now we issue and keep track of all our phantom shares on Capdesk, whereas before we were printing allotment letters and offers and then physically storing them somewhere. At the time, those documents were the only way we knew how many shares were given and the vesting schedule of them. On Capdesk, it’s faster to search and much easier to find what I’m looking for.”

Making employee equity understandable

Billie believes that everyone should participate in the company’s success, so every single employee is allocated phantom shares. Stephan explained that this comes from the founding team. Employee shares have been in place from the company’s first hire, right up to its current team of over 100 employees.

“Despite being integral to our company values, phantom shares are something that employees typically find complex, especially those without legal or financial backgrounds.

“The Capdesk tool has made equity simple for every stakeholder to understand. They can see their shares, the scheme they’re on, the vesting schedule and the terms and conditions of the phantom share agreement. Essentially, they can check at any time how many shares they have and what their shares are worth.”

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Meeting needs and saving hours

“From our perspective, Capdesk has all the features we need right now. It requires no more than clicking a few buttons and filling out a few boxes to add a new employee to our phantom share scheme on Capdesk. It takes us a maximum of ten minutes, compared to our previous method of generating whole documents from scratch and then chasing people to get the documents signed and stored. It’s saved our HR team a tremendous amount of time – at least an hour per new employee.

“Moving to Capdesk definitely scored Billie a number of efficiencies. By logging all equity and shares in Capdesk we’re able to display changes in any of these areas online, and don’t have to do anything on paper. Now, if anybody leaves the company, goes on maternity leave or takes extended leave, we can easily log the update in Capdesk and be done with it. It’s as simple as that.”