We love the idea that everyone in the company feels like an owner of Collato.
That's why we created a "virtual share incentive plan," where virtual shares are allocated to every employee so they can benefit from the road we have ahead of us.
So how does this work?
When your future salary is negotiated, next to a fixed gross salary, you'll also talk about the "variable part" of your overall package. At Collato, this 'variable' means 'virtual shares.' These variables can be worth nothing or a lot, depending on how well Collato is doing.
So let's say that next to your fixed annual salary of €65.000 you're getting an additional €20.000 in virtual shares, so your overall package amounts to €85.000.
Our virtual share plan always runs for 4 years (after which, you will re-negotiate the follow-on package), which is also called your "vesting period." Therefore, your overall virtual share package will be 4x the yearly amount you agreed on as "variable salary." In our case, this would be €80.000 (4x€20.000). This is the overall value of virtual shares of Collato, which you can earn over 4 years.
But one step is still missing. You're effectively attributed an amount of virtual shares. To calculate how many virtual shares you will earn over time, you need the overall sum you are supposed to earn (in our case €80.000) and today's value of a share.
Without going too much into detail, the value of a share (virtual or not) is the result of the overall company valuation, divided by the amount of shares, as listed in the trade register (Handelsregister). So if the company is worth 20 million and there are 50.000 shares – one share would be worth €400. If in the next financing round, there is now 60.000 shares and the company is worth 60 million, the share is already worth €1.000 (you participate in the valuation multiple minus the dilution of new shares being issued).
Take the €80.000 and divide it by €400. You'll end up at 200 shares, which you can earn (i.e. "vest") over the course of 4 years. So 50 each year, or ~4 every month.
All clear? Sweet!🍦
The first 12 months of your vesting, you are not getting any shares in case you leave the company. This is because there is a "cliff," which states, that you only get the shares you vest in the first year, if you are still with the company at the end of the year. So one day after your first 12 months, you get attributed the full shares, which were accumulated over the first 12 months (In our example 50 at once). After this, you vest shares on a monthly basis (in our example: ~4 a month).
So how many shares have you vested after a full 18 months? Exactly 37,5% of all your shares (in our example: 75)
So how to you turn your shares into real money?
Well, you benefit from the upside of being an owner of the company. Now you also have the downsides: You will only get the money in case of a "liquidity event." This is the IPO or sale of a company. In a nutshell, if the founder has an exit you will have it too. Sounds fair?
Why is it virtual shares and not real shares?
Good question! Ask Olaf Scholz why in Germany, this is impossible (other than in the US, for example). There even is an initiative of the German startup association on this: #ESOPasap. If you want to read more, find more info in German or English