Frequently Asked Questions
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. We do in fact appreciate the work that they do and want to allow them to focus on more complex matters.
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 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 broad knowledge and reach. Currently Upstock works in 63 countries and we are working to add more.
Going one step further, we have converted our documents to comply with many local jurisdictions. We first launched this in the United States and have been expanding to other countries. Our goal is to allow anyone anywhere to easily share company ownership.
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, accept 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, we can replace stock options with RSUs (Restricted Stock Units) to make bookkeeping easier and upgrade the traditional equity model with dynamic RSUs which issues equity to workers from a pool 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.
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.
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, and can not understand the trajectory of the company’s overall value.
With Upstock workers and employers are able to see equity splits and real-time equity growth at a glance. This often results in 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 and does not provide “legal advice.”
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.
How are stock options different from RSUs?
RSUs are more likely to award workers. If you consider a variety of likely exit scenarios, workers are more likely to receive some amount of reward when receiving an RSU than a stock option. This is because there are many trap doors where workers end up forfeiting stock options or lose the funds they used to exercise their stock options. The risk of forfeiture is lower with RSUs. In some scenarios the total amount of the award received from an RSU could be lower than its option counterpart but these scenarios are fewer and farther between.
Stock Options Have to Be Purchased. After stock options have vested, workers must pay to exercise/purchase their stock options or end up forfeiting them back to the company. In the case of termination, the worker must pay to invest in a company they just quit or were fired from.
Stock Option Taxation. Workers are taxed in two main ways with stock options. First as ordinary income for the value delta between the option grant and the option exercise. Second, on the delta between the exercise and the final sale of the stock. In some cases, an Alternative Minimum Tax is applied.
RSU Taxation. With RSUs, taxation is timed to occur with a landmark event (IPO or sale of the company) and shares can then be sold to cover the amount of the tax bill, also known as “sell to cover.” As a result, RSU based equity allows workers to avoid paying tax on the stock until there’s money available and the company has successfully reached a liquidity event.
Stock Options Put Early-Stage Workers at Risk. Early-stage workers take on a disproportionate risk in accepting stock options than later-stage workers. Due to the rapid increase in company valuation, the tax bills for early-stage workers are often significantly larger than later-stage workers. These taxes are usually due before the stock can be transferred, sold, or liquidated in any way.
Stock Options go on Cap Tables. Because stock options are recorded in a cap table, each new worker added to the option pool requires an entry on the cap table. This incurs additional lawyer and administrative fees for each new worker added.
RSUs diminish the need to adjust the cap table after every new equity grant, as well as the requirement to get board approval for each new worker added.
Company Voting. Stock options can eventually grant workers shareholders’ rights, if they exercise the option. This issue creates uncertainty and even hiring and firing paralysis for owners and investors.
With RSUs, workers can receive a stake in the company without being granted shareholders’ rights. This makes cap table management easier.
Stock options have 409A Valuation Costs. Companies that issue stock options are required to pay for a 409A valuation every 6 to 12 months. Third-party vendors must be paid to do this each time at a cost of around $1000 to $14,000 a year.
For more check out our blog post:
Stock options aren’t the only option
RSUs do not require ongoing 409A Valuations. Since RSUs only fully vest at a landmark event, paying for ongoing 409A valuations are generally not required. This saves a lot of time and money.
How do Upstock RSUs get taxed?
When you are offered 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 acquired, reaches an IPO or a direct listing.
Upstock's RSUs allow you to defer tax until a later date when money is available and the stocks are able to be sold or transferred. If the company is not successful or takes many years of slower growth, the worker won’t have to shoulder the burden of high exercise price plus high tax to achieve ownership.
Please note that Upstock does not provide legal or tax advice. Seek your own independent tax advice if unsure.
Here are some online resources for international tax help:
How do 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 design to keep costs 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 RSUs just like the most successful companies.
Reduced Payroll Expenses - Reduced Payroll Expenses - Upstock reduces payroll expenses by up to 75% by allowing workers to work in exchange for equity and not only cash.
Reduced Legal and Tax Risk - Upstock’s legal documents are created by the world’s top equity lawyers and have been vetted by top experts.
Automatic Updating - Upstock eliminates expensive legal document updates by automatically upgrading software and associated legal documents to fit changing requirements and regulations. Always be compliant and up to date, with no additional out of pocket costs.
Does Upstock work for consultants and advisors?
Upstock works for all service providers (employees, independent contractors, consultants, advisors, etc.)
Why was Upstock created?
We believe that every team should have access to tools that help unite & build a successful company. Upstock was founded on a core belief: successful companies are built by fully aligned collaborative teams. Collaborative alignment arises, in part, when each worker believes they will be fairly rewarded in exchange for their hard work. Currently 99% of companies do not have the tools they need to inspire their teams to put forth the best work of their lives.
That’s why Upstock was created. We help founders share their companies and passion projects quickly, easily, and safely by sharing ownership in a way that helps workers get emotionally invested in their work. We do this by combining RSUs with an awesome interface.
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 as well as the estimated value of their shares. As they continue to contribute and 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.
Upstock was founded by Casey Fenton, the grandfather of the sharing economy. His startup Couchsurfing is about sharing your life and having a backstage pass to the world. Upstock is about sharing ownership of the projects and companies you are passionate about. When people are aligned, they can move mountains.
How is dynamic 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.
A couple examples: A marketing manager may be hired at a $4,500 per month cash rate, plus an assignment of 1,500 equity 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 points 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.”
How is fixed equity assigned?
Fixed equity is similar to stock options. Workers are assigned a set number of units to receive over a set period of time. A common configuration is four years with a one year cliff.
With fixed equity a worker’s equity is determined before work is completed based on market rates and negotiation.
Once signed up, who has access to the Upstock platform?
There are two types of dashboards, one for founders and managers, and one for employees, contractors, and advisers.
The admin dashboard for founders and managers lets you see and approve your team member’s activity, set up cash limits, and keep track of amounts paid and equity earned.
There is a personal dashboard for each onboarded team member (employees, independent contractors, advisors, etc.) where they vest fixed RSUs and/or input their time or task and activity. The worker dashboard shows workers their equity rates and also any cash rates if applicable. The amount of access a worker sees varies depending on their role and how their manager has set-up the company’s 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 our equity attorneys and vetted by experts. 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 does not provide “legal advice.” If unsure, Upstock recommends that you seek your own independent legal advice before adopting a compensation or equity plan.
How do I create a performance based equity pool?
Upstock’s platform allows you to create equity pools by selecting a size, say 1%, 5%, 10%, 20% or entering your own custom percentage. Next you add the team members you want in the pool (founders, employees, independent contractors, advisers). Upstock will then 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 initial 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
What are standard percentages used to create a performance equity pool?
It depends on a variety of factors. 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.
A 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. Workers will receive more equity than cash.
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 available 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 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 can see their share in the company growing in real time along with their hard work. Upstock’s visual dashboard and simplified legal documents help people understand, trust and believe in equity compensation. The result? Upstock helps your team feel aligned with the long term goals of the company and motivated to make the company successful.
How can Upstock help my business?
Upstock brings you a top quality equity compensation system that was, until now, only available to the world’s top companies. This system helps motivate and retain your 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 for some companies by 75% because founders can compensate hard work with equity instead of only cash
Reduced Legal and Tax Risk - Upstock’s legal documents are created by some of the world’s top equity lawyers
Automatic Updating - Upstock eliminates maintenance by automatically upgrading software legal documents to fit changing requirements and legal regulation.
How do I change what my workers can see?
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 workers can only see their own equity or also see the equity of all other team members.
Do I need an attorney if I use Upstock?
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. Many of our customers do not need to consult an attorney. That said, we always suggest if ever in doubt, consult your attorney. We do not provide “legal advice.”
Do I need an accountant or tax advisor if I use Upstock?
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. We are neither accountants nor tax advisors.
What happens to an employee's equity when they leave the company?
Unlike stock options which require vesting and cash purchase at a strike price, employees who are awarded dynamic RSUs can retain some or all of their RSUs even after they depart a company. The amount is pre-determined by the company and recorded in the legal documents and the Upstock dashboard. However, if the employee is terminated for “cause,” the worker may forfeit all of their equity.
What is an Award Agreement?
The Award Agreement is the legal document that describes a worker’s equity awards as governed by the company’s RSU Plan.Terms and conditions include the equity rate the team member will be earning and their vesting requirements.
What happens to unvested equity in case of a company sale?
Typically, equity will fully 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 (cliff) and there has been no termination for cause.
The terms of the company’s Performance Equity Plan and Award Agreement give information about what happens to the Dynamic Equity.
How do you determine the potential cash value of the equity?
The cash value of a worker’s equity is shown on the Upstock dashboard. Every team member's equity is calculated and adjusted automatically. The cash value shown is based on the company’s Live Estimated Valuation (LEV).
What is an equity multiplier?
A dynamic equity multiplier multiplies the number of equity points earned by each team member in the equity pool during a specific range of time.
For example, if a worker earned 100 points in an hour and the equity multiplier is set to 3x then the worker will have received 300 points for that hour.
What is Live Estimated Valuation (LEV)?
The value displayed as LEV is an estimate of the company's valuation based on the value of the work activity that has been logged since the last valuation was recorded. Its value is computed by this simple formula:
LEV = Valuation + total cash value worked since valuation + total equity value contributed since valuation
What is a Monthly Cash Limit?
When a team member is a part of a dynamic pool, the admin may set a monthly cash limit which the worker can earn up to. This limit allows the company to smooth cash burn.
When team members work beyond their monthly cash limit then their cash rate will be added to their equity rate and they will be compensated entirely by equity. This helps them receive a bigger slice of the equity pie.