Following a legislative change to the country’s stock option policy, Latvia is now ranked as the most startup-friendly country in Europe, sharing the top spots with neighbouring Estonia and Lithuania. The new reforms in Latvia, and earlier last year in Lithuania, have turned the Baltics into a region with the world’s most favourable stock option policies, making it easier for startups to attract and retain the talent they need to succeed.
In response to the recent policy changes, global venture capital firm Index Ventures has revised its country ranking based on the favourability of stock option policies, placing all three Baltic nations ahead of 22 other countries including the US, the UK, Israel, France and Germany. They have been urging policymakers to act, arguing that stock options are critical to their ability to attract talent, and “if we don’t eliminate the talent bottleneck, we risk squandering the incredible momentum that European tech has built up in recent years.”
This has led countries across the continent and the European Commission to review the rules that hinder startups’ ability to access top talent. France revised its stock option scheme last year, while Germany is expected to pass new legislation in the next few months. The European Commission is expected to publish its Startup Nation Standard in March, which will address stock options. In January 2021, a very favourable new approach to stock options was introduced in Latvia. It is slightly more flexible than Estonia’s (already existing) scheme.
“I am delighted that the Latvian parliament has approved what Index Ventures rates as the most attractive stock option plan in Europe. The Baltic states have amazing founders with more hustle than many of their Western European peers, but they need to fight hard to attract the talent needed to scale more globally-competitive startups like Bolt, Vinted and TransferWise. Competitive stock option regulations are a critical tool to attract and retain this talent,” commented Andris K. Berzins, Managing Partner at Change Ventures, a pan-Baltic seed venture capital fund.
The change has been welcomed by local entrepreneurs, including Mikus Opelts, CEO of Giraffe360: “Giraffe360 is a Latvian-origin startup with global growth ambitions and that means we need to be able to attract the best talent to drive growth. The new stock option legislation approved by Latvia will be essential for us.”
“Latvia is one of the most dynamic economies in Europe, partly because we try to use the same speed, flexibility and open-mindedness that our startups have, in our legislative process. I’m thankful to our startup ecosystem that collaborated with a group of young parliamentarians in order to carry this legislation through parliament,” added Reinis Znotins, Latvian parliamentary deputy.
Employee ownership in the form of stock options, the practice of allowing employees to acquire a slice of the company they’re working for, has long been used successfully in Silicon Valley to help startups compete for the talent they need. This is especially important for emerging businesses, who can’t compete with large corporates, tech giants and consultancies on salaries alone. Today’s findings reveal that five European countries now have more favourable stock options rules than the US.
In response to the changes, Index Ventures partner Martin Mignot said: “It’s great to see policymakers in the Baltic countries with such a forward-thinking approach, recognizing the value of the startup economy and the role that entrepreneurs can play in creating jobs and economic growth. While these policy changes will be welcome news to Latvian and Lithuanian startups and startups expanding into those countries, we now need the rest of Europe and the EU to follow suit.”
Retrieved from: labsoflatvia.com