Why is Upstock Different?
In addition to allowing investors to buy equity in a company, equity can be promised to the company’s team. Our system makes “performance equity” accessible to all team members (including independent contractors and advisors), simply and easily, not just high profile investors or key employees.
Team members accept a portion of their wages through a structure called dynamic equity split. They agree to work for less cash upfront in exchange for equity which can grow in value as the company succeeds. By doing so, the team participates in liquidity events and profit-taking, similar to cash investors.
Upstock is the online system which makes this division of equity legally possible and simple to manage. We take care of all legal documentation and store it online for easy access. We also manage an online dashboard where the company and team can monitor their equity growth.
Equity can be in the form of a time pool or a task pool. In a time pool, each share is calculated by taking an individual’s total equity (i.e. the number of hours they worked x their hourly equity rate (*this needs an asterisk to explain how this is calculated/pre-negotiated)) and dividing it by the group’s equity total (which is factored by taking the hours for each person x their hourly equity rate and adding to the individual’s total equity).
It’s easier to understand with an example. John and Mary both works at Upstock where John is a first-year copywriter and Mary is an experienced graphic designer. Naturally, they are compensated at different rates. How does it work? Say John works 5 hours earning $10 of equity per hour and Mary works 2.5 hours at $20 of equity per hour. In this example, both will own 50% of the equity pool. For John, it looks like this: (5 x $10) / (5 x $10 + 2.5 x $20) For Mary, it looks like this: (2.5 x $20) / (2.5 x 20 + 5 x $10). What does this mean if there was a liquidity event today? If the company has 1,000,000 shares total across all classes of equity, and if Upstock pool is 10% of the total, then both John and Mary would receive 50,000 shares (1,000,000 x 10% – 100,000. 50% of 100,000 = 50,000).
The time pool is great for large, distributed teams who have a specific number of important actions to perform. Time pool entries can be entered in any time unit required, i.e. hourly, daily, weekly, monthly, or whatever makes sense for the company. A task pool works similarly but, instead of recording hours and rates, each task performed is assigned a certain number of points. (*this also needs an asterisk to explain how these points are determined).