LFP222 – Share Schemes & Equity Management: Opportunities & Pitfalls for Founders and Employees w/Ifty Nasir CEO Vestd

London Fintech Podcast

There is a real art to how a founder manages his companies equity. If he gives it, or its derivative, share options, away too fast for too little value – whether funding or staff – he will be giving away his creation on the cheap and losing control fast. Vice versa hoarding it to himself will produce inadequate funding and not top-notch senior staff. If this is the spectrum then there is in addition a whole dimension of the terms and conditions over equity schemes. There are plenty of hidden elephant traps for the unwary even for “Day1 co-founders” (eg a simple 50:50 split yet one co-founder puts most of the work in…). Furthermore we have what was “pre-tech” an administrative nightmare of managing hordes of shareholders and regulations/laws thereto. Vestd who formed in 2014 and have thousands of companies on their platform offer a “guided SAAS” product where the platform is closely allied to tons of experience in re.

Founder and CEO Ifty Nasir formed the company in 2014 after a lifetime’s international career with BP and considerable experience on the internal corporate finance side of deals and equity including at one point hiring Lord Sumption on a challenging deal. He joins us today to discuss the whole “how hard can it be” (as always “harder” and in this case “quite nuanced”).

Topics discussed include:

• the first Yorkshireman on the show?
• Lord Sumption’s office
• Ifty’s worldwide career in BP
• founding Vestd
• experiences with estimating funding costs and how much equity it takes to Angel and to get a business off the ground
• seeing how many times sweat equity went wrong…
• “so many errors are people don’t think about it”
• problems even on day1 of NewCo – case study of a new business and some basic pitfalls
• “Putting together shareholder agreements is the difficult thing”
• agile partnerships as a template
• conditionality as key
• Case Study of the first company I worked for
• the fluidity of equity, salary and time in contributing to the growth of the NewCo
• “there are a lot of really great tools around this – eg Mike Moore’s ‘Slicing Pie’ “
• challenges eve with equity-low,
• cash-rich NewCos in the consultancy space
• the experience of many founders in managing the Cap Table that its no big deal, a spreadsheet for a few years and then suddenly a great panic/problem – dynamics that come from not fully understanding a topic and the risks being run and then those risks crystallising
• the different standards of retaining or not retaining equity when one leaves a company
• definition of Cap Table
• does it include Share Options as well as issued capital?
• fully-diluted Cap Tables
• clearing up the cap tables and how the importance of this has changed the raise dynamics with the advent of firms like Vestd
• the role of technology in changing these whole dynamics
• share option schemes and when one joins the company leading to very variable rewards and management challenges – my experience
• tiers of management sitting around not trying hard any longer as an outcome of a poorly designed lock-in/vesting scheme
• good leaver/bad leaver terms
• the UK’s EMI incentives scheme and the tax incentives/benefits thereof
• 70% of such schemes are “exit only”
• discussion of the challenges of overly-locking in staff and waiting for exits which in difficult markets may be far far away
• tailoring schemes per employee and how much easier that is with platforms
• “guided SAAS” product/service and the regulatory restrictions thereon
• where and when to use accountants, lawyers and Vestd
• Vestd’s plans for the future

And much much more

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