How Upstock Works
Who can use Upstock?
Anyone! Our proprietary software makes it easy for you to set up your own employee equity program in minutes. Our dashboard and legal documents can be used by startups, Small and Mids-Sized Enterprise (SME), or big corporations.
How does Upstock equity work?
Upstock is a user-friendly technology layer on top of industry standard legal documentation. Our product combines instant equity deployment, a dynamic value splitting algorithm, and a compelling real-time motivational visual dashboard.
We've designed a system to optimize trust, efficiency, and alignment between the worker and the organization as a whole. Our innovative software allows any team to create equity pools, divide company ownership, and monitor equity splits and/or profit sharing directly inside our app.
Upstock makes it easier for businesses of all sizes, especially those with limited resources, to allocate and administer company ownership without the expense or delay of engaging third parties to serve as middlemen, such as lawyers or CPAs.
At Upstock, we believe business legal services like worker equity should be able to be set up and managed with just a few clicks, rather than having to be created from scratch by expensive lawyers each and every time. We aim to standardize and virtualize business legal tech much in the way Amazon AWS has standardized server administration. By replacing highly paid system administrators with easy-to-customize DIY administration that employers can manage themselves.
Can you use Upstock internationally?
Yes! We have put together an international legal team with a broad knowledge reach. Currently Upstock works in 63 countries worldwide and we are working to add more.
Going one step further, we have converted our documents to comply with local jurisdictions. We first launched this in the United States and Iceland, and have since expanded to include Canada, Norway, Germany, Australia and others.
For a full list of upstock compliant countries please check:
What are the main features of Upstock's platform?
Upstock's system has three core components:
1. Instant Equity Deployment - Upstock allows employers to offer workers legally binding equity with just a few clicks, using documents created by the world’s top equity lawyers. These units can be easily issued inside our system without requiring third parties such as lawyers or CPAs. All legal documents are industry compliant, accepts online e-signatures, and optimized to work in 63 different countries world-wide.*
Traditional equity plans focus the worker on the vesting calendar (typically resulting in diminishing returns on productivity over time), rather than on day-by-day, moment-to-moment performance. With Upstock, workers are granted a dynamic proportion of equity, shifting according to real-time value contribution, rather than a set amount of shares tied to a vesting schedule. As such, performance becomes the focus rather than a vesting calendar, as workers are granted equity based on time, task, sprints, and/or a landmark event.
2. Real-time Algorithm - Upstock’s equity units are distributed dynamically between workers according to our performance-based algorithm, which measures workers’ input to determine a fair equity split according to each worker's contributions.
Traditional equity plans focus the worker on the vesting calendar (typically resulting in diminishing returns on productivity over time), rather than on day-by-day, moment-to-moment performance. With Upstock, workers are granted a dynamic proportion of equity that shifts according to real-time value contribution, rather than a set amount of shares tied to a vesting schedule. As such, performance becomes the focus rather than a vesting calendar, as workers are granted equity based on time, task, sprints, and/or a landmark event.
3. Motivational Dashboard - Equity splits are displayed in real time on a visual dashboard, generating a meaningful feedback loop for workers and employers. The visibility of each worker’s input into the company helps generate alignment with organizational performance, allowing each individual contributor to see their value creation as it relates as a percentage of the whole.
Workers can’t believe what they can’t see. Equity is meant to be a motivational tool, however, it’s challenging for employers to generate this motivation if workers have no way of visualizing the amount of equity they are accruing, or understanding the trajectory of the company’s overall value.
With Upstock wokers and employers are able to see equity splits and real-time equity growth at a glance. This often results is both increased alignment and performance across the workforce. Now workers can feel that they are actually headed toward a shared goal: building a valuable company, knowing that they will receive their fair share when the company succeeds.
*Please note that Upstock is not an attorney, does not provide legal advice, and assumes no liability if you rely on it.
Is Upstock’s platform only for tech companies?
No! We also work with non-tech or “brick and mortar” companies. One of the most important things to us in founding Upstock was inclusivity. We believe that everyone benefits from shared ownership. To that end, we designed our platform to include all workers, including those traditionally left out of equity plans such as contractors or gig workers. Upstock can be used by businesses of any size: online businesses, retail, construction, manufacturing, restaurants, crowdfunded projects and many more.
Any company can use Upstock’s dynamic performance equity platform.
What kind of stock or equity does Upstock use and how does it work?
While many companies default to using stock options, Upstock offers dynamic equity utilizing Restricted Stock Units (RSUs) with performanced or time based equity sharing. This approach is used by Fortune 1000 companies such as Amazon, Apple, Google, Microsoft, Uber, and Twitter.
Dynamic Equity is a proprietary set of legal documents created by the Upstock legal team and are primarily based on RSUs. They have significant upsides compared to stock options including tax benefits. RSUs minimize the risk that stock options would normally expose employees to.
Restricted Stock Units are compensation issued by an employer to an employee as a promise for company stock. These stock units are issued to an employee at predetermined compensation rates through a distribution schedule after completing required performance milestones or fulfilling a certain number of hours of work.
RSUs give an employee interest in company stock which has no tangible value until the company’s landmark event has occurred and so will not be taxed until the stock is distributed. RSUs are taxed as income while stock options require employees to pay capital gains taxes for company stock on the date issued and cannot be transferred or sold. Once RSUs are issued, the worker owns them outright. With Upstock RSUs, vesting is triggered at a Landmark Event, such as a merger/acquisition or IPO, when the equity also has tangible value. Upon vesting, they are considered income, and a portion of the shares is withheld to pay income taxes. The employee receives the remaining shares and can sell them at his or her discretion.
RSUs vs. Stock Options?
There are many differences between issuing Dynamic Equity and Stock Option grants. That said, here are two key differences:
100% worker owned at the moment it is issued: RSUs have been evaluated to be more valuable to employees and less risky than stock options. RSUs are always worth something, and it is 100% the property of the worker the moment it was issued. This stock will not go “under water” like options can. The issued RSUs retains value, regardless of the performance of the company’s stock price (unless it goes to zero, but it will never cost the worker money out of pocket).
Taxation: In most cases Stock Options are taxed as income at the time of exercise, regardless of whether shares are sold or held. Taxes on gains also may need to be paid upon subsequent sale of shares. RSUs are generally taxed when they vest. This means the tax is due when there is money to pay for it. RSUs are also a lot simpler for owners to manage from a legal and tax perspective.
How does Upstock RSUs get taxed?
When you are issued Upstock RSUs, you don't have any immediate tax liability. RSUs are taxed when the shares are actually delivered, at the point of a landmark event such as when a company is aquired or reaches an IPO.
This is the key difference that makes Upstock's RSUs stand out from both stock and stock options. They allow you to defer tax until a later date when money is available and the stocks are are able to be sold or transferred. If the company is not successful or takes many years of slower growth, the worker and owner of RSUs don't have to shoulder the burden of high teaxes for ownership. The fair market value of the shares at settlement is a deciding factor of the taxable income.
Please note that Upstock does not provide tax advice and assumes no liability if you rely on it. Upstock recommends that you seek your own independent tax advice for more information about how RSUs will affect your tax liability.
In what ways will Upstock's RSUs impact my company's bottom line?
Upstock brings you a top quality equity compensation system that Fortune 1000s use to motivate and keep talent, in an easy to use platform desiogn to keep costs to down to a bare minimum.
Affordable Plans - Upstock’s price point is about 40x more affordable than comparable systems.
Improved Stock Units - Upstock’s legal documents issue flexible RSU units just like Fortune 1000s.
Reduced Payroll Expenses - Upstock reduces payroll expenses by 75% while allowing scalability.
Reduced Legal and Tax Risk - Upstock’s legal documents are created by the world’s top equity lawyers.
Automatic Updating - Upstock eliminates expensive legal document updating by automatically upgrading software and updating documents to fit changing requirements and legal compliance. Always be compliant and up to date, with no additional out of pocket costs.
Does Upstock work mostly for insider employees, or it works for external consultants/advisors too?
Upstock works for all service providers (employees, independent contractors, consultants, advisors, etc.)
Why was Upstock created?
Upstock was founded on a core belief: successful companies are built by collaborative teams. Collaboration arises, in part, when each worker believes they will be fairly rewarded in exchange for their hard work.
At Upstock, we believe that shared company ownership (also known as equity) is a critical tool to produce motivation, dedication, and collaboration between team members. Upstock offers tools to make sharing company ownership extremely simple, so that teams of all sizes and budgets can effectively join forces to build the next big thing.
Upstock allows teams of all sizes to instantly deploy equity to their workers, without having to hire expensive third parties such as lawyers and accountants. Traditionally, only a small number of companies, primarily tech startups, could afford to offer shared ownership to their workers. With significant up front costs, startups in the past would often have to pay 10’s of thousands of dollars to set up a reasonable set of stock option documents. It’s no wonder that most small businesses get stuck with napkin and handshake agreements.
Shared company ownership allows workers to focus on a common goal of shared success and help everyone feel like ‘we’re in this together.’ It helps workers prioritize long-term growth of the company over short-term personal gain. And it creates a feeling that workers have gotten a fair exchange for the value they’ve generated.
We’re also passionate about making sure the equity splits remain as fair as possible. Upstock’s Dynamic Value Splitting assigns equity according to each worker’s contributions, ensuring that they receive a share of the company corresponding with their effort & impact.
At Upstock, we are building a world where everyone involved in a business can click a few buttons and see, in clear detail, their share of the company at any given time. As they continue to contribute to positively impact the company’s growth, each worker is able to view their own individual share moving up and to the right.
When teams come together, innovation is born. But in order for teams to truly unite, they need to feel like they are all in the same boat. Upstock allows teams to trust that they are all getting their fair share, so every worker can focus on helping the company succeed.
How is equity assigned, if not by vesting schedule?
When workers are onboarded to Upstock’s system, employers enter agreed-upon cash and equity rates. These rates can be updated or changed at any time.
For example: a marketing manager may be hired at $4,500 per month cash rate, plus an assignment of $1,500 per month worth of points in the equity pool. Or, a java developer who normally charges $100 per hour instead agrees to charge his client $50 per hour in cash and $50 per hour in equity.
As the worker completes work, inputs such as hour/day/week/month or project/task are logged, and workers are granted pool points (representing shares in the company) according to their agreed-upon equity rate. Their slice of the pie dynamically shifts as they put in increased work, and the value of their shares grows as the value of the company grows.
To further incentivize workers to put in extra effort when it is most needed, leaders are also able to use bonus equity grants to compensate workers for additional efforts through critical periods.
For example, an employer could double pool points for the weeks before a big goal, or when tied to a landmark event (e.g. any current worker in the organization at the time of the landmark event gets a 200% bonus of RSU pool points).
Upstock drastically simplifies a company’s cap table because an entire performance pool, with all of its workers, can be represented with a single line item. For example: “Upstock performance equity RSU pool, 10,000 shares.”
Once signed up who has access to the Upstock platform?
There is an admin dashboard for founders and managers which lets you see and approve your team member’s activity, set up cash limits, keep track of the amounts paid and the equity earned.
There is a personal dashboard for each onboarded team member (employees, independent contractors, advisors, etc.) where they input their time or task and activity. The worker dashboard will show them their rates and what cash and/or equity they have earned build in up in real time. The access to the information a worker sees varies depending on the role people have in the company and how the manager has set-up the transparency settings.
Who should draft my company equity plan if I use Upstock?
By using Upstock’s platform you will have access to legal documents pre-drafted by top equity attorneys. This way you can avoid the initial legal fees for your company’s equity plan and other legal agreements. Many Upstock users do not use an external attorney to draft equity plan documents as Upstock is designed to offer a complete worker equity plan with all the necessary documents.
Please note that Upstock is not an attorney and does not provide legal advice and assumes no liability if you rely on it. Upstock recommends that you seek your own independent legal advice before adopting a compensation/equity plan.
How do I create a performance based equity pool?
Upstock’s platform allows you to create equity pools by inputting the size of your equity pool, by either selecting one of the recommended sizes (5%, 10% or 20%) or customize your own. Next you add the team members you want in the pool (founders, employees, independent contractors). Upstock will automatically prepare the necessary legal documents for your workers.
Pool sizes can be easily increased later. However, decreasing the pool size requires a majority vote from the members of the equity pool.
Upstock will guide you through how to do this as part of the inital onboarding process. Additional pools can be added on the Manager's dashboard under Set up.
For some examples of standard pool sizes please check out Examples Pools on our website underneath the Learn tab.
What percentage should the performance equity pool be set at?
It depends on the amount of cash you have to pay team members. If you are already an established company and have received some investment you may want to start with a small equity pool (1-5%) with the possibility to easily increase in the future.
If you have a reasonable amount of cash to pay team members you can choose a middle range size equity pool (5-10%). This is a balance between paying your team in cash and incentivizing them with equity.
The large equity pool of (10-20%) is suggested for startups or companies waiting on their first investment. This is when the company does not have a lot of cash to pay team members. They will receive more equity than cash.
How much equity should a founder keep?
The goal of a performance-based equity pool is to provide fair equity distribution and ensure that everyone in the company is rewarded for working hard and producing results.
Depending on their performance, the founders should decide how much equity they should keep for themselves and also consider if they need to keep back some equity to offer investors or advisors.
How does time-based and task-based equity compensation work?
The equity compensation each team member will receive is based upon performance milestones that can be based on time spent or tasks performed. The amount of equity points are decided by the CEO or administrator, and are reflected in the amount of equity pool points availible in each pool.
The terms of equity compensation earned are stated in the legal documents for each worker. By entering time or recording tasks performed into Upstock, the worker's equity distribution will be calculated automatically and is shown on the worker's dashboard.
Does the Upstock equity rate relate to an equivalent cash value?
No. The total equity value is based on the company’s valuation. This provides the value of the equity pool percentage, and in turn the value of the individual’s equity earned inside this pool.
Does Upstock have a real time tracker built in?
Yes, Upstock’s users can track their time using the platform.
General Usage Questions
How can I better motivate my team using Upstock?
Upstock provides you with an affordable, easy to use platform using dynamic visualization of equity, where your team see their share in the company growing in real time along with their hard work. Upstock’s visual dashboard and simplified legal documents make people understand, trust and believe in equity compensation. The result? Upstock makes your team feel aligned with the long term goals of the company and motivated to make the company successful.
How is Upstock helping my business?
Upstock brings you a top quality equity compensation system that Fortune 1000s use to motivate and keep talent. Upstock does this by giving you access to:
Affordable Plans - Upstock’s price point is about 40x more affordable than comparable systems
Improved Stock Units - Upstock’s legal documents issue flexible RSU units just like Fortune 1000s
Reduced Payroll Expenses - Upstock reduces payroll expenses by 75% while allowing scalability
Reduced Legal and Tax Risk - Upstock’s legal documents are created by the world’s top equity lawyers
Automatic Updating - Upstock eliminates maintenance by automatically upgrading software and updating documents to fit changing requirements and legal compliance
How do I change visibility for my workers?
The admin dashboard for owners and managers contains a setting called “Team Transparency” which lets you set up different levels of visibility for your team members. For example, you can choose if they can see only their own rates and equity or the rates and equity of all team members. You can also choose if the team members can see all equity pools of the company or only the equity pool in which they are taking part.
Do I need an attorney if I use Upstock?
We are not attorneys, so it is always advisable to consult one. However, by using Upstock’s platform you will have access to legal documents pre-drafted by top equity attorneys, so you can start sharing equity with your team immediately.
Do I need an accountant or tax advisor if I use Upstock?
We are neither accountants nor tax advisors. Tax laws are complex and vary by country and local tax jurisdiction so it is always advisable to consult with an accountant or tax advisor.
What happens to an employee's equity when they leave the company?
Unlike stock options, that require vesting and cash purchase at the set strke price, employees awarded dynamic equity own that award outright. The employee's vested dynamic equity will remain in the pool until a liquidity event. However, if the employee is terminated for a grievous reason, it is possible that there would be just cause for the employee to forfeit the equity.
What is an Award Agreement?
An Award Agreement is a legal document which describes your equity offer's terms and conditions, such as the equity rate the team member will be earning and the vesting requirements.
What happens to unvested Dynamic Equity in case of a company sale?
The terms of the company Performance Equity Plan and Award Agreement give information what happens to the Dynamic Equity. Typically, equity will vest upon a company sale or other qualifying event known as a Landmark Event so long as a team member has been with the company for the qualifying period and there has been no termination for a grievous cause.
How do you determine the potential cash value of the equity?
Upstock visual dashboards show you the company’s equity based on its valuation, how it changes in real time and every team member equity calculated and adjusted automatically.
What is equity multiplier?
An equity multiplier multiplies the equity earned in the equity pool during its period of validity.
What is Live Estimated Valuation (LEV)?
The value displayed as LEV is an estimate of the company's valuation based on the amount of activity that has been logged since this valuation has been in effect. Its value at a given time is computed by this simple formula:
LEV = Valuation + total cash value worked since valuation + total equity value contributed since valuation