Equitybee is partnering with UI Charitable, a Donor-Advised Fund sponsor built for the way startup employees and founders actually hold wealth. The two companies solve different ends of the same problem. Equitybee helps you unlock the value of startup equity. UI Charitable helps you give from illiquid and private assets. This post is about the second one, and why it matters most in the year your equity pays off.
We are pleased to announce our recent funding round of $6.6M. The round was led by Group11, with participation from Battery Ventures and LocalGlobe. In the past year, we have enabled hundreds of Israeli startup employees to exercise their stock options, and now we will leverage our experience and vast Investor Community to support the US market.
In the United States, Startup employees, the company builders, forgo 50% of $60 Billion in unexercised stock options every year. When employees leave their startup, they have a limited amount of time to exercise their stock options before they expire. The cost to exercise can reach hundreds of thousands and sometimes millions of dollars, as the employee is required to purchase their stock as well as potentially pay substantial taxes on the theoretical profit at the time of exercising the options. Very few employees have these financial resources available, causing 50% of employees to forgo their stock options, lose their hard-earned equity and the right of participating in the future success of the company they helped to build.
We connect the startup builders with our Investor Community. This enables the builders to obtain all of the capital they need to exercise their stock options and pay the taxes, become a shareholder and take part in the company’s success. EquityBee Investors Community includes thousands of investors from all over the world, including family offices, funds and accredited investors looking for a new way to invest in companies that were previously inaccessible to them. The employee and the investors share a portion of any future exit gains.
In recent years we have taken over the Israeli market while helping hundreds of employees from more than one hundred different companies including Taboola, MyHeritage, SimilarWeb, MagicLeap, IronSource and many more.
“As a serial entrepreneur and being part of the startup sphere for the last 15 years, I have witnessed countless employees, colleagues, and friends lose out on a significant part of their compensation because they couldn’t afford to exercise the options they worked so hard to earn. EquityBee is changing the situation and helping startup builders. We have successfully solved this problem for Israeli employees, and now EquityBee is ready to support every startup builder in the US,” says Oren Barzilai, CEO of EquityBee. “Our mission is to enable all startup builders to own their hard-earned equity and their share from the company they helped build.”
“The US is home to over 525,000 tech companies employing over 11.2 million tech workers of whom 6 million work for private tech companies. While inconceivable, as it stands today, a vast amount of these workers do not get to exercise or finance their stock options thus lose annually about $30 Billion. This is why we invested in EquityBee. EquityBee aims to solve this massive market failure and help millions of employees realize what is rightfully theirs. The solution the company offers is a no brainer for all parties involved: the employees, the startup companies employing them and the investors using EquityBee. After witnessing their success in Israel, Group 11 is excited to be a leading backer of EquityBee in its important mission to help U.S. employees. The sky’s the limit for EquityBee and we’re excited to be on their team and Board of Directors.” says Dovi Frances, Founding Partner at Group 11.
Founded by Oren Barzilai, CEO, Oded Golan, CPO, and Mody Radashkovich, COO. Barzilai and Golan are serial entrepreneurs and childhood friends. Barzilai founded Tapingo which was acquired by GrubHub in 2018 for $150 million.
EquityBee raised $8.3M to date, from leading VCs including Group11, Battery Ventures, LocalGlobe, as well as CEOs and entrepreneurs.
As part of the recent funding round, Dovi Frances, General Partner and founder of Group11, a leading Silicon Valley fintech VC, is joining the company’s Board of Directors.
What a Donor-Advised Fund actually is
A Donor-Advised Fund is a charitable account held by a sponsoring 501(c)(3), in this case UI Charitable. Once you contribute assets, you no longer legally own them, which is what makes the deduction work. What you keep is advisory privilege. You advise how the funds are invested, when assets are sold, and which charities receive grants over time. The deduction happens in the year you contribute. The giving to actual charities happens on the timeline you advise, with no required distributions in any given year.
Stage two: this is where UI Charitable is different, and where it fits startup employees
Here is the part that matters for the way you specifically hold wealth.
UI Charitable allows you to donate long-term appreciated assets such as public stock, private stock, cryptocurrency, etc. to a Donor-Advised Fund, and receive a tax deduction equal to the fair market value of those assets. Startup employees are exactly the people whose appreciated wealth sits in private and illiquid form. UI Charitable can serve the asset class most of the giving world cannot.
One important boundary
To be clear about what does and does not apply. You cannot donate shares that are covered securities by the Equitybee agreement and received by using Equitybee stock option funding. You can, however, donate other appreciated assets to UI Charitable.
*This is not tax advice. Consult a qualified tax professional regarding your specific financial situation.
Case Study: A startup employee in California
How does it actually work? A side-by-side comparison of a startup employee in California.
This same example would work for any appreciated asset donated in-kind.
Startup employee in California
Salary: $350K • Private share value: $1M • Shares donated to a Donor-Advised Fund: $300K (30%)
Getting started
get started with UI Charitable by visiting https://www.uicharitable.org/equitybee
