In this episode we discuss: What you need to know about ESOPs. We are joined by John Fraser, Financial Director for PEAK.

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We chat about the following with John Fraser: 

1. How can companies effectively educate employees to ensure the success of their ESOPs?
2. What steps should organizations take to navigate the complexities of share options and stakeholder involvement?
3. How can companies balance basic implementation steps with long-term implications when designing share schemes?
4. At what point should companies transition from spreadsheets to dedicated tools for managing share data?
5. What are the best practices for communicating compensation strategies and leveraging resources like the Index Ventures report?

References

• https://linkedin.com/in/john-fraser-a1bb8876

Biography 

John Fraser brings a wealth of experience with over 20 years in finance and accounting. He spent 4 years specializing in VAT with HMRC and 10 years in the oil and gas industry, working with a NYSE-listed company in diverse roles spanning statutory reporting, management accounting, FP&A, internal audit, and controllership. For the past 6 years, he has been a key contributor at Peak, leveraging his expertise to drive financial excellence.

To learn more about Beth and Brandon or to find out about sponsorship opportunities click here. 

Summary

19:52 Introduction to ESOP and Its Evolution

21:17 Navigating the Initial Steps of ESOP Implementation

24:05 The Importance of Employee Education and Communication

26:07 Challenges in Seeking External Support for ESOP

26:58 Strategic Considerations for Future-Proofing ESOPs

29:00 International Considerations and Cross-Border Challenges

32:21 Choosing the Right Share Management Tools

40:12 Final Thoughts and Key Takeaways

Brandon 0:05

Brandon, hello and welcome to another episode of the operations room. I am Brandon mensinger, joined by Bethany Ayers, how are things going? Bethany,

Bethany Ayers 0:13

I'm not your lovely co host today. I'm just plain

Brandon 0:18

what happened to the loveliness of Bethany Ayers, I've lost it.

Bethany Ayers 0:22

Yeah, I'm doing well because today's my birthday.

Unknown Speaker 0:25

Oh, it's her birthday.

Brandon 0:26

My goodness, how many candles on the cake for Bethany?

Bethany Ayers 0:30

So if you remember, last year, I got confused and thought I was a year older for the entire year. And so then when my birthday rolled around, it was great because, like, I was already there. So this year it's not quite as exciting, because I remembered my age. So instead of the surprise of turning 48 all over again, this time, 48 is two years away from 50, so we're getting ever closer to 50. And for the most part, I'm okay with it, like my husband's a few years older than me, so he's always there before me, which helps, I think, get me mentally prepared for those milestones. But then also, I can't remember, did I talk about I did I talked about that dinner that I went to with all of the women, where the average age was probably 50, and that dinner I am thinking about a lot today, because I'm like, I am entering my power of 50. I This is a power zone, and kind of, what are each of those decades? And although I may be exiting my peak earning power, I have to look it up of exactly when that stops. If there's an area like you peak at how much you can earn, and then you're past it in these markets. And so I need to maximize the earning before being passed it, although I have been blessed with good genes, and so I don't think people know my age until I tell them publicly. And now everybody knows my age. I fear

Brandon 1:56

for the same because the fact of the matter is, on balance, I look young for my age, and it's very helpful to be fit and in shape, in particular when you work at scale ups. And this is more of like a I feel like a Donald Trump thing. I'm just like the visual cues of a person and what they look like and what that means to be able to how they perceive you. And anyway you slice it, there is ageism that is out there, and Brandon being the same thing 50 years old right now, I feel like I'm on the tail end of the scale up journey of youth. So what lies beyond the scale up journey frightens me to some extent, because, to your point, earning power and capacity is there. That's not going to last forever. There's only so long. I think you can go working in these young organizations, being 60 years old or something like that. You know what I mean. So what happens next is not clear.

Bethany Ayers 2:41

Yeah, whereas in corporates, it's kind of the start of your super career. You do a 55 year old CEO is average age, if not a bit young. And I think that's where looking at board seats and how do you become the elder states person is one of those things to start considering into that next decade. So pondering life, career, all of that today and decades. It'd be interesting to hear your take on on the various decades. I know our 20s were very different. For me, it was incredible pressure to succeed, not living up to my expectations, not knowing what I was going to do and not having a lot of fun. Yeah, I just felt like I was an underachiever. I didn't know what to do, so I moved from America to the UK straight after graduation, and I gave up the in the UK, what you call the milk round, like all of the graduate stuff and just have a clear career track. I came to the UK. My degree didn't mean anything. I was too late for the milk around I missed the this is the way you become a consultant, and this path, or this is the way you become a lawyer, and here's your path. And I had always just expected to be one of those path people, and suddenly I wasn't a path person. And I know I know I didn't want to be a lawyer. Everybody thought I should be one, and all my friends are lawyers, if they're not doctors from high school. So that was really like, I decided not to go on that path, but then not having a path meant I had to figure it out myself, and I didn't do it well, and I finally landed in my career making role in my early 30s. And so for me, my 20s were a lost wilderness of underachievement. My 30s were getting married, having kids, building my career, not sleeping, living with postnatal depression that I hadn't realized I had. So it was like just this blur of darkness, if I think about my 30s, but not necessarily. Well, some of it is a darkness with the postnatal depression. Some of it was really fun with work and growing my career, and kind of achieving all the things that I thought I should achieve, but not sleeping, which is really good to do that when you're young, when you can survive not sleeping for such a long time. And I feel like my 40s. Been working on me discovering joy, contemplating death, and therefore living and like just sorting out a lot of shit. And so I'm kind of interested to see what does moving into my 50s mean children are grown up. Career is established. No more depression, way less anxiety, really looking forward to menopause and so no longer having hormonal craziness. And then what does that mean? And what can I achieve

Brandon 5:33

when I think back in my 30s, I was dragged along. It was simply that I did good work. The person that managed me decided for me, in a sense. Hey, Brandon, how about this? So this led to a series of promotions over the course of my 30s. This happened to be right time, right place, right person, the right skills, mostly, I would say, to get the job done. And from that point, it became a series of the same thing over and over again. So with very little forethought and thinking things through, I just kept going down a pathway. As I started getting promoted into more senior positions, I started to find out that I was wanting, you know what I mean, and lacking because I hadn't prepared, or I hadn't thought about a lot of the skills that I actually needed to be successful, so retroactively, almost in a way, already in those positions. So I was having to backfill a lot of, I don't know what you want to call it, like people, person skills that I needed to be equipped with to be successful going forward, to ensure that, you know, whatever role that I was in, I could actually functionally do it properly, number one, and then number two, then put myself in a position where I could actually legitimately move on to the next role with good confidence at that point. Then that's kind of where, where I ended up in my 40s. I would say it's

Bethany Ayers 6:40

interesting that you've specifically worked on soft skills. We don't love the term soft skills, but I'm just using it to to categorize what you're talking about, whereas I have instead worked on me and practicing forgiving myself, practicing liking myself, practicing trusting myself, practicing having confidence in myself, and by being able to build that up in me, has given me the ability to have more patience and compassion with others. And so rather than developing specific skills or techniques, I have just changed as a person, and therefore can relate to people in a better way than previously.

Brandon 7:25

Yeah, so doing the the work, the inner work, to be more effective when it comes to actually relating to people. Because

Bethany Ayers 7:30

of that, I did it a bit to relate to people, but I didn't actually do it for my career. I did it so that I was be a happier person, and it's definitely worked. And just by being a happier person, I interact with other people better.

Brandon 7:46

So we've got a great topic today, which is decoding employee share option plans, what an organization needs to know. We have an amazing guest for this, which is Mr. John Fraser. He is the financial director for peak or peak AI for all activities across finance and legal. So with that, I wanted to ask you a couple of questions. Bethany. The first one was John brought up this thought, which I think is quite true, which is, where does the option scheme fit in organizations in terms of ownership and responsibility? Because the fact of the matter, if you're on a scale up, you don't have a dedicated equity team, as it were, so you have valuations and tax which sits with finance. You've got the scheme rules and the governance, which maybe sits with legal. You've got employee education and attracting and retaining talent which sits with people. So it's a bit of a question of, what do you do in a scale up when dealing with these ESOP programs?

Bethany Ayers 8:37

And it's not just what do you do and who owns it, but how do you not make mistakes along the way? Because everybody's thinking about their little bit of it rather than the long term, and I think that's what a lot of companies struggle with, and it's actually something that we spoke with Priscilla as well, when you're preparing for IPO and suddenly you can't find any of your previous employees. Not all the documents are signed. You have a messy cap table. And so how do you think ahead? And who should be the one who thinking ahead? Because it's all of these disparate areas. Actually would sit with a COO logically as the person who's the glue between the organization. And actually, I'm thinking there's one other part of what the people team does beyond just employee education and sending them, although I think probably I don't know finance might be the one who should actually like deal with all the documentation. But it depends is, how does stock options fit into your remuneration strategy? So are you following, like the index thing and you have your nine boxes or, you know, and which departments earn more? And does everybody get options? And do you do top ups? And do you do, you know, additional awards for high performers? But that also needs to be tied into finance so that you can forecast it well and not have to go back to the board and ask for more. Options in between rounds, which never goes down well.

My previous two companies, it was my job to ensure, from a forecasting standpoint, we could take that allocated pot and use it effectively across the round. So the question of how you use it effectively was given to me, and then also the responsibility of actually creating the framework itself is what I did. I always prioritized product development, product and engineering, to be in the top tier, as it were, tier number one for larger allocations of option share grants, simply because of the obvious, which is they're building the product. They're putting in the blood, sweat and tears to make that happen, to have a fantastic product, which is the cornerstone of your PMF. And the second allotment was given to marketing back office, essentially. So that was the tier two functional plot, as it were, very much an underappreciated plot of individuals that worked extremely hard for the business. There in that tier two, and then tier three Was anyone that had commission, so sales, commercial, that kind of function where they got the least amount of options because they were being compensated in a different way. So I'm just curious what you make of that. So

I think I would go more for market expectations, and I am not sure that that middle bucket have massive expectations. So are you being overly generous unnecessarily? Would be my question back, or is your strategy to have and attract the absolute top talent that you can? And therefore you're not giving away unnecessarily because you're hiring one amazing finance I don't know, controller, who can do the work of five people. And therefore it's worth in effect, because they're doing the work of multiple people, giving them multiple people's grants. So that would be the considerations I would take into it. And also I agree that salespeople or people on commission are getting cash. But in early startups, when you find that person who can just sell and not sell off roadmap and random things, but who can really help with product market fit, who can really sell it has a bit of a strategic ability to sell but also figure stuff out, that person, even if they're earning commission, is massively valuable, and over time, you should continue to top them up so that they're really engaged and embedded in the organization. You can't afford to lose those people if you're lucky enough to find one. That's

actually a fantastic point and a subtlety, for sure. And the way that I used to break this out was that if there's any person on the commercial team, where there was much more of an ambiguous creative element, where they were doing something to work something out for us, and usually this was like leads on partnerships or corporate partnerships or whatever, for that individual, we do something quite special. That sense to your point, and that's that's what you're referring to. I

think it is. But I wouldn't necessarily, even if you hired that person for that role. I wouldn't necessarily give them loads to begin with. I mean, it doesn't matter, because you have a long vesting period, but it's once they've proven themselves to show your appreciation or not, not even appreciation, like recognizing their value through options. I

was always of this opinion that we have an option pool. We know another option pool is going to happen. So I want to be very aggressive about using this option pool primarily as a tool for attracting talent. And this is back in the heyday when talent was scarce and hard to get. So I would aggressively push hard on four year option grants, tie them in for those four years in terms of the value of that option grant plan. And, you know, we'll do some level of promotions and top ups, but that's really a far secondary consideration to getting the talent in the company and committed for the four year period, assuming that you're gonna have another round with another option pool to have. So what do you make of that? Because I had some feedback from some other folks historically, where they felt that that wasn't very balanced of me. So

given the current market, I would have concerns not knowing when your next round is coming and running out of options. And also you need to keep some aside for key exec hires who just eat up a large chunk of your option pool. And what you don't want to do is not be able to hire that amazing new Chief Product Officer, because you don't have any options left, and you have to go to the board, and the board's like, why did you not forecast this in the first place? And because there's just not that same regularity of funding at the moment, or money needs to last longer, and there needs to be more efficiency, I would err a bit on the side of assuming you're going to have to make some key hires. You might not know exactly when, but it's going to be before your next round, whereas it kind of used to be you make your next key hires with your next round and save some for them. So

here's a question to you, which is, how did you figure all this out? Because I think when we talked to John, we talked about, you know, advisors outside of the company. The advisors tend to be quite siloed in terms of their feedback. So a legal person will have a clear legal lens, say, an accounting or a finance person will have a very particular lens around the filings and so on. And as a CEO, if, in fact, all this reports up into you and like us, you end up owning it and trying to make it happen. How did you figure this out? Trial

and error, and lots of like, Oh, why didn't we think about that before? And talking to other people, I think it's more helpful to talk to other coos who have experienced the trial and error and the mistakes than the experts, because unfortunately, the experts are experts in the law or experts in how things work. Answer you're the exact question that you ask them, but they're not operators, and so they're not feeling the pain of decisions made now that cause operational issues three years in advance. They're telling you how to optimize for whatever or what the HMRC rule is, or what the right inbox is to send to the HMRC, but they're not the one saying, Oh yes, you'll send it to that and they'll send it to that mailbox, and you will get no receipt, but they have received it, and if you don't hear from them in six weeks, do it again. You know, like, they're just like, send it to this inbox, and they don't understand the pain of what happens after that, where it's some of the just like how to administer it. Think about things in the future. Make sure you capture in your HRIS or in your share scheme tool, everybody's email addresses when they leave, and their forwarding addresses. And how do you make sure that when they move house, you learn about it? Because if there is an exit event and you need to send shares around that are actually sometimes physical copies, you need to know all of this really boring stuff that you don't think about when you're setting up the scheme, but you start to think about when things get complicated later down. And I think that, again, is some of the stuff that Priscilla spoke about of, like, how do you track employees after they leave? And one of the really quick wins on that is you do, how you have, if employees invest in a company, you'll have some sort of holding company. And, you know, everybody, take everybody investing of one line for employees or friends and family. You know, small checks do the same for when options vest. Because if you don't do anything when options vest and people exercise their options, it automatically is another line on the cap table, whereas, if you have all of those exercised options rolling up into another plan, then you can nominate people to do the signatures and not have to chase whatever percentage that need to be signed. You know, it's just like little things like that that nobody tells you. And

then when it comes to the employee education and employee value proposition, any words of wisdom in this pod? Because there's all the standard stuff, obviously, in terms of you know people that are onboarded to the company, there's the share option education session that you would do, and some of the refreshes throughout the year and so on. But in addition to that, is there anything else that wants you to think about in terms of how to ensure that that space is addressed effectively,

keep it simple and assume people know nothing. What is a share what is a share option? What is the HMRC, or what is the IRS? What is evaluation? What is a strike price and where to go for tax advice? What are the things that you might need to consider for tax as expats, we have our own special set of pain. But even for your normal employees, what does EIS mean? What are capital gains? What is income tax, you know? And so maybe you don't need to go into all of that in your v1 but at least like, here's your extra resources. Here's where you should look. Here's how you should make this decision, because you don't want to take the liability for it, but you should sign post people. The

other little tidbit that was quite useful was making sure that for the talent acquisition people, as part of our roles and benchmarks that we had where we would make offers to individuals, the talent acquisition team had two things, which is, they had access to our table so they knew for every functional role type and seniority level, what the allocations were empowering the talent acquisition people with the tables themselves, so they clearly understood what that was, but more importantly, the value around it, the value prop around it, and being able to explain the benefits of the program, being able to articulate that to the candidate the appropriate stage. They don't have to be a master of this stuff, but the couple basic things of getting people excited by it in that talent acquisition funnel to prep them for when they would speak to me at some later stage. So why don't we Park it here and let's get on to John Fraser,

it's sometimes difficult to know where to start. You join this ecosystem of EMI share options and EI. Investment and r, d, tax credit, and all these acronyms are chucked at you, and it's quite a steep learning curve. It's not necessarily easy, especially because you might be on your own or your team might be relatively small and inexperienced as well. And I think shared options is a bit like procurement in businesses, like no one really knows where it fits, because the business generally isn't the size that will have, like, an equity team that deals with share options, or won't have a supply chain team that will deal with procurement. And so the valuations piece and the tax piece and the share based payment calculations, they might fit best for finance. And then you've got, like, the scheme rules and the option agreements, all the corporate governance that comes along with it fits best for legal but then there's all the employee education and what's your attraction and retention and incentivization strategies that fits best for the people team? And I guess it's best to find out as well, like sometimes might just be lumped with a CEO function. So then, if you don't have it internally, then you need to get that advice externally, but then the same problem arises, right? Like, where'd you go? So then I

think that's a good starting point. So you can maybe, if you can just tell us your story from the start of where you actually did start, and how that panned out over the course of time, and your reflections back on that in terms of what you would have done differently.

The obvious starting point was HMRC. They have a pretty detailed manual. I mean, they do call it a manual of the scheme, and just to try and it was almost a case of just going through that from the start to the end, which I know sounds very dry, but, you know, I think that sort of foundational level of knowledge is just very useful. And a lot of the things that trip people up are the basics. Like, how do you implement the scheme? It's all right, getting all your template documents lined up, but then what do you actually do with it? From then, like, how do you actually execute the scheme? I think there's quite a lot of like, urgency and a lot of waiting placed on getting the documents in order. And then people come, we have these template documents. And then it's a case like, what do we do with it? Who does what? Like, when do we need to do it? Which button do we need to press in government gateway? Like a lot of the actual basic, simple stuff has kind of been forgotten about in the panic to make sure that you have all the template documents good to go. So as a case of quite a lot of these things, like just getting the absolute fundamentals, the basics in place first is kind of your starting point there.

But also still not easy. Again, another co story I saw was somebody had said, this is the email address that we're using to send something to the HMRC, again, for our international audience, HMRC is the equivalent of the American IRS. It's the tax collection agency for the UK. And it's like, we've sent it to this inbox and I've had an automated reply and nothing else. And it was a really weird email address. And it's just like, has anybody else used this email address? Do we have the right one? And nobody else had used it? And it and it looks like maybe there was a typo, but even though there was a typo, he still got an automated response, and now he's tried on a different one, but that's just kind of like the level of bureaucracy and craziness that you're dealing with.

There's always a good one about just take screenshots every time you're in government gateway and it says that you've, like, completed the task or submitted the form, take a screenshot, because you won't get anything through, and then in DD or whatever, you're asked, will prove that was submitted and prove the HMRC authorized it. And unless you've got that screenshot, chances are you don't have any other sort of proof of that. That's

wild, so then you don't get anything back, just confirming whatever? Yeah,

there are certain things you can go into the portal and you can drill down. You can see a screen that will show you when something was submitted. But with others, you need that screenshot. So

that's really like the most important piece of information for anybody listening is to take screenshots, in case you haven't been

so is there anything for that first step when you think back on reflection that you would have done differently to accelerate that and clear your pathway to get that done faster and more cleanly,

I think in terms of setting up the scheme and what you don't know or what you don't tell you at that point. Like I say, I think the admin side of things is quite easy to pick up, and anyone can really do that. But I think certain other aspects, especially around the importance of employee communication and education, is something that, again, I think, potentially gets lost in that panic to get documents and stuff in place. Because ultimately, that's like the whole point of this, right, whether it's to attract talent or retain them, or, you know, incentivize future performance and stuff. And it's not necessarily just finance and legal teams that don't have that knowledge. Employees don't either, right? They quite often, could be joining, you know, a startup or something for the first time, straight out at uni, and the world of share options is completely new to them, completely alien. They might have no experience at all. And so. That the like benefits of the scheme can get lost. You're thinking you've got this best in class scheme that is designed to attract the top talent and retain them and incentivize them for future. They don't care. They don't know what it is. So like that constant need to educate and reaffirm that as well, because it can get lost over time just through natural turnover in your staff is, again, I think, something that gets lost. And so I think it's important that perhaps, depending on your onboarding program, a session on shared options can be included in that onboarding program, just to take them through the basics of the scheme and and how it works, and kind of set their expectations at that point. And it could be opened up as a it doesn't necessarily just need to be for new joiners. It could be opened up as a refresher for existing employees as well. I'm

gonna just change tack a little bit, because I find this fascinating. What you're talking about, who do you go to for support? And that it's siloed within businesses, but it's also siloed within advisors. Can you talk a bit more about that frustration and ultimately, did you ever find anybody who could

help? There's sometimes very little consideration of the future business needs, like, there's quite a sort of templatized rollout initially, which only sort of considers the immediate term and the immediate request, and not necessarily like the implications of your decisions at that point, like, if you're rolling out a scheme, then you're going to be considering things like your lever provisions and whether or not you're going to let people exercise options that are vested when they leave the business, or whether they're going to just lose them all if they leave. Like, you know, these are the sorts of decisions you're going to make when you're creating your scheme and designing your scheme, but doesn't necessarily consider the impact of those decisions. The

obvious question is, what are those things that companies should do now to think about the future, to save themselves a lot of pain,

plan ahead, like what's your future vision, and don't get caught up on the, like, the immediacy of the documents and registrations and stuff. So what's your award strategy? Who are you going to award to? Is it going to be everyone, like all new joiners? Is only going to be a select few? Are you going to use options as, like, a meta award, like a bonus, that sort of thing, instead of a monetary reward? Like, what, what is your award strategy? And then, like, what's your your award framework? Is it going to be a percentage of salary? Is that percentage going to be higher for tech roles like data science or engineering? And so you get down the line, you don't necessarily end up like forecasting your pool depletion, right? Like you can, you easily can, because you know your business model. You know your hiring plan. You now know, because you've got your award strategy, you know how much you're going to award based on your hiring plan, so you can then forecast how quickly your pool is going to be depleted, and therefore when you might need to go to board to top that up.

And then what about actual compensation strategy like I feel like everybody I speak to, we all just go to the index. Basically, is that the best piece of advice out there? There's no point paying any money for anybody else.

It is great. It is really good.

So for the listeners, there's an Index Ventures report that I think everyone tends to look at and use as a reference Bible for crafting our programs. And

I think that again, comes back to my point on where do you go for advice? And quite often, it makes sense to go to your investors, right? Because they'll have a portfolio. They'll have seen how it's been done. That quite often just goes. They'll just chuck the Index Ventures report at you and tell you to read that and crack on with it from there, which I say, it's a fantastic document. Everyone should definitely read it. It's great. It is helpful to be able to ask people and bounce ideas off and actually like create something together with people, rather than just reading a document and just following that yourself.

But basically, you're struggling to find the people. I mean, I think this is part of where our original conversation came from, is there's a bit of a gap, let's say, in the market, of like a holistic advisory for ESOP, and we haven't even talked about when you change into another country and have multiple countries share schemes to deal with.

Yeah, I feel like there is something that can be more strategic, a bit less transactional. I feel like with it being transactional in nature, that can start to erode the sort of fundamental purpose of share option plans to try and incentivize employees, and because of the silos and advice the business is left to fill in the gaps and join the dots in that process yourself, through the multiple advisors and people just stumble through until they have the knowledge or or until something goes wrong, really, until something happens. You could find something in due diligence, right? That comes up, you're sort of making sure every. And is filed, etc. During due diligence, depending on your size, it's going to come up in audit as well. It's very common. Audit query is right? Show me everyone who was awarded share options, and they'll just pick a sample of their agreements and make sure they're all signed and dated and all these simple things, so your compliance with the scheme becomes regular. So

what are the gotchas when you go international, what do you need to consider when that happens? I

think that, again, is probably something that isn't considered at the outset, but again, probably is known right like I say, you've got your business plan, so you would know these things, and that whole global mobility piece isn't really considered, and then all of a sudden, you're faced with a group of employees who are moving from one country to the other, and they're all packed ready to go, and it's like what's going to happen with their share options? Because generally, crossing borders with options from one country into another, you could run into quite tax problems there that you want to avoid. UK to us is the obvious one. And knowing the implications of that, if you're operating the EMI scheme in the UK, you want to ring fence that tax treatment because it's great, right? You don't want to lose that moving to the US. And so it might be a case that you if you are second employees over there, and they do have, chances are it's going to be people who've maybe got a bit of tenure. They would probably do have vested options, because that's the sore that you want to move to a new region to sort of grow your business out there. Then they'll likely have the opportunity to exercise those vested options in the UK there for protecting that EMI treatment. And then you can, you can move them to us and just grant the ISO options in the US. The US tax treatment applies there. So, you know, there are ways and means of doing that and sort of protecting tax status for them, and making sure that they're always kind of under the most tax advantageous scheme that they can but it does require a bit of planning ahead.

And so you get to a level of complexity that means the spreadsheet is broken. I know everybody loves a spreadsheet, but sometimes we grow, grow the spreadsheet. At what point should companies start to look at some sort of share management tool? I don't know what the official name for that category is, but the ledges invested of the world, Cap

table management platform. I mean, as I say, my accountant. So I love a spreadsheet. I've probably hung on to spreadsheet longer than most, just because of my background, but I do think a spreadsheet is perfectly okay for quite some time. They genuinely don't think there's anything wrong with that. But as you say, up until a point, there is that inflection point where it becomes too difficult. There's too much risk attached. And you even the accountants, need to ditch the spreadsheet and move to something a bit more sophisticated. And generally, you'll start to feel that pinch. Once your hiring plan, like, really ramps up. Once you've got, you know, a good chunk of new employees quarterly, or whatever your hiring plan is, then that's the point as well. If you're a couple years down the line, maybe a bit longer, you're probably going to get to the point where you've got employees who have multiple awards, maybe not necessarily fully vested top ups, but if you are issuing awards for merits or promotions, things like that, then you're going to have a number of employees who have a number of different awards, all with different vesting schedules, maybe with different exercise prices. And definitely at that point, your spreadsheet is going to start to creak. Things are going to be a bit too complicated, and you're probably going to want to look for a bit of help in terms of a platform at that point, I think depending on the number of awards you're issuing, I think once you get north of 100 then I think you're probably going to be starting to look at a platform at that point.

And then the question is, because I get asked this all the time, and I have zero opinions, vested Carter ledgie, and then I think there's some new ones coming up as well, in the cap desk.

I think at the point where we were looking at a platform, I think cap desk was being acquired by Carta. So we looked at Carta, we looked at vested and we looked at leggy. Carta seemed to be the common one that people were saying, oh, you should go to look at Carta. Great for what we were looking at it. Carta was expensive.

That's what I hear. Everybody's like, oh, cardA is expensive. Oh,

it does a lot, though, but it did more than we needed or wanted it to do. So we were paying for a lot that we didn't necessarily need. Vested was interesting. I must admit, I can't really comment much on their product or their services, because we had a horrendous first meet.

Oh, please do tell horrendous. What happened with vested?

Yeah, I think the sales guy was new, you know, he didn't have a lot of experience of selling and pitching vested before our call. Yeah. And whether or not that was the reason, or whether the there was a senior member of the team decided to join as well. So I don't know if it was to watch the guy in action, if it was to help him out, or if maybe, maybe he loved peak and decided we he needed to get peak as a customer. And so he joined the call if his intention was to help the new sales guy out. It didn't work, because it completely flustered him. He was all over the shop, and the senior member of the team tried to join in, tried to help, but he seemed to join in at just the worst possible moments, and it would knock the guy off even more. So it was just really bit of a car crash, and the senior member of the team as well was just he was very laid back. But I actually mean that literally, he was almost like horizontal on the call. I just can't even describe it. It was just such a weird and I know that has nothing to do with the like how their platform actually works, but it was one of these ones that just took you back so much, and you're like, I'm not gonna be able to work with these guys. This is their intro to me, and it's not going well, and I can't take this forward. But I think one thing that we had in our back of our minds throughout the whole process, again, was the employee side of things, because obviously, it's a tool for administration. It's going to help your finance teams, your legal teams, administer the scheme. But as well, it can be used as a tool for employee engagement. It can be the place they go to self serve, like, they can find out all the key bits of information that they need to know about the scheme, right? Like, how many do they have, where they are and where they are in their vesting schedule? Where are my documents? How much are they worth? And that led us on to ledgie. So I think that was something that massively stood out to me about legis platform, was the KPI dashboard, the like stakeholder dashboard that all employees would get, because it was really simple. Just told them everything, all the simple stuff that they needed to know, and it was just right there and really easy to consume dashboard as soon as they logged in. Felt like a pretty Yeah, like, self intuitive tool, like you could work out how to use this and maintain it yourself without requiring constant hand holding from the ledgy team. Going forwards, to my point on having that whole like joined up. Like, there's lots of different stages in the process, and some are finance, and some are legal, etc, and it makes sense to have a tool that joins them up as well, you know? And now most of these tools are across, like, the whole life cycle, you know? They can help you with the valuation piece at the start. Can have all your template legal documents in there as well. It can link up with your HR system so all your people data is synced and up to date well, as long as the as long as the HR systems up to date, then you know your your cap table management data will be up to date as well. And then it can generate all your HMRC reports as well, so you've got annual returns notifications, etc, and they can just be done at a click of a button now as well through these platforms. So you definitely reduce, reduce your admin massively through one of these tools.

And then Carter seems to just be buying everything. They bought cap desk, and they bought this other tool that I never would have known about, except for some angel investing a company called Vauban in I think it's called Robin in France, that provides

s, p, vs. Is that the right

acronym in special purpose vehicles? Yes. So a way for angel investors to invest, it be a single line on the cap table is that an SPV,

yeah, or a nominee, even if the platform was predominantly like originally created for private, limited companies, now they're moving towards being both private and public, and adding additional product features like you say that will help, that will deal with like nominee companies that will deal with transactions in a public market as well, like trades buy and sell through the platform as well. So yeah, feel like they are extending their product range to cover all these types of scenarios now too. But I think some are probably further along than others. So if those particular features are important to you, then, yeah, you'll need to check out how far they are along on their product roadmaps.

And I would guess I'm totally making this up. You can tell me if I'm right or not, but my experience is generally, companies coming out of Europe are made for international because they have to be, because they know they're not going to stay in their home country, whereas American companies tend to have international be an afterthought, and so don't actually handle it as well as

you say, European companies have better knowledge of schemes, and whether that's the EMI scheme in the UK or ISO in the US or whatever. So if you

are going to go international, where you are. International already, ledgy is probably the better choice if our listeners could only take one thing away from a conversation with you or listening today. What's that one thing?

I think it's plan ahead. I think it's always consider that that future vision, whether it's the basics like keep your house in order at all times, in terms of documentation and things like that, because you never know when it's going to be needed for DD or audit. But also, yeah, the more strategic business planning side of things as well, like forecast your pool depletion or your EMI eligibility, for example, you don't want to suddenly realize that you're over the thresholds for the scheme, and you can issue EMI options more as well. So yeah, consider that sort of long term vision as well, rather than just the immediacy of getting a scheme in place and getting the first batch of share option awards granted.

Perfect, lovely. So thank you, John Fraser, for joining us on the operations room, and I think your advice is well heated in terms of trying to avoid surprises with your option scheme programs that you have in your companies. So thank you for joining today, and if you like what you hear, please subscribe or leave us a comment, and we will see you next week.