Rewarding Talent, 2026 Edition… | The VC Corner Summary

1. Key Themes

Theme: Europe's employee equity gap is narrowing, but the rules are fragmenting and shifting country by country

The gap narrowed, though the data is self-reported

The article cites Index's original finding that European staff were far behind US peers, then shows movement since. Original gap: "Index found that 75% of Series A and B companies in the Bay Area gave equity to all employees, against 32% in continental Europe. At late-stage companies, European staff owned around 10% of the business and US staff around 20%." Update: "European employees owned 16% of their late-stage startups, up from 12% in 2019, against 22% in the US, and that more than €5bn has gone to European startup employees since 2019." The author flags the bias: "Those are the campaign's own figures, so read them as a direction more than a measurement."

Tax and legal regimes changed almost everywhere

"Germany rewrote its option tax in 2024. The UK doubled its EMI company limit to £6m on 6 April 2026... France, the Czech Republic, Denmark and Belgium all changed theirs this year, and in March the European Commission proposed one optional option scheme for the whole EU."

Where an employee lives drives their after-tax outcome

"The same gain can be taxed at 14% in Portugal or at up to 49.5% in the Netherlands, depending on where your engineer lives." The author initially expected the country tab to be "the boring part" but now calls it "the tab i'd send a founder first."

Theme: Employees are exercising less, so option design must account for affordability and liquidity

Exercise rates fell sharply

"In Q4 2024, employees on Carta exercised 32.2% of their vested, in-the-money options, down from 54.2% three years earlier." The article's framing of the implication: "An option only rich employees can exercise is a bonus with a 90-day expiry date."

Secondary liquidity is becoming an employee expectation

"Startups ran 396 tender offers on Carta in 2025, up 62% on 2024, while a record 16,538 employees sold shares, so staff now expect to sell some equity long before an IPO." The article promises a "tender-offer playbook for when employees want cash before an exit."

Theme: The AI talent war has rewritten terms at the top of the market

Vesting and grant terms are moving

"OpenAI cut its vesting cliff to six months in April 2025 and dropped it entirely in December." On grant sizes: "Median initial grants for AI/ML engineers rose 31% between January 2024 and February 2026."

Theme: Pool sizes have crept above Index's old European plan, and the founder-dilution math matters

Current median pool sizes by stage

Index's 2018 plan was "start at 10% at seed, then top up to 12% at Series A, 14% at Series B and 16% at Series C." Today's medians "sit a little above the European plan": 12.1% at seed, 15% at Series A, 16.8% at Series C, and 19.6% at Series E and later. At Series C, "the median pool now outweighs median founder ownership (16.1%)."

Who pays for the top-up

"Almost every term sheet asks for the pool top-up to happen before the new money comes in, inside the pre-money valuation. That means the founders and earlier investors fund it, and the new investor pays the same price per share as if the pool were already there." In the worked example, "the top-up alone costs the founders 3.1 points of that dilution," and "every extra point of pool you agree to at Series A comes out of your stake at the same rate."

2. Contrarian Perspectives

Seed pools should be smaller than many investors demand. "Some seed investors still ask for a 20% pool before they wire. Carta's Peter Walker argues founders should open at 8% to 10% and grow the pool each round, because startups now hire fewer people at seed." The author's takeaway: "Size the pool to the hiring plan, and make the term sheet follow it." This runs against investor-default pool requests and the common practice of pre-funding a large pool.

The geography of the employee matters more than the grant size. The author expected the country tab to be "the boring part" but found a 14% vs. 49.5% tax spread on the same gain. This implies founders hiring remotely may be underweighting tax residency when designing equity packages.

Options may be a poor retention tool if employees can't afford to exercise. "An option only rich employees can exercise is a bonus with a 90-day expiry date." Combined with the drop in exercise rates (54.2% to 32.2%), this challenges the assumption that granting more options automatically rewards talent.

3. Companies Identified

Index Ventures

Description: Venture capital firm; publisher of Rewarding Talent and the OptionPlan tool
Why mentioned: Its 2017 handbook and 2018 expansion set the benchmark for European employee equity, and its method underpins this guide
Quotes: "In December 2017, Index Ventures published Rewarding Talent, a handbook on stock options for European founders." "Index still points founders to the same grid through its free OptionPlan tool, which now draws on 20,000+ grants."

Carta

Description: Cap table and equity management platform
Why mentioned: Primary source of current benchmarks on pool sizes, exercise rates, AI grants and tender offers
Quotes: "In Q4 2024, employees on Carta exercised 32.2% of their vested, in-the-money options, down from 54.2% three years earlier." "Startups ran 396 tender offers on Carta in 2025, up 62% on 2024."

OpenAI

Description: AI research and product company
Why mentioned: Case study of how the AI talent war is changing vesting terms
Quotes: "OpenAI cut its vesting cliff to six months in April 2025 and dropped it entirely in December."

Not Optional (campaign)

Description: Index-led campaign advocating broad employee ownership in European startups
Why mentioned: Source of 2024 figures on European employee ownership
Quotes: "The Index-led Not Optional campaign said in 2024 that European employees owned 16% of their late-stage startups, up from 12% in 2019."

The VC Corner

Description: Newsletter and resource publisher (author's own)
Why mentioned: Publisher of the Equity Toolkit 2026 and the guide's templates
Quotes: "The Equity Toolkit 2026, an Excel file with seven working tabs built on the method above."

4. People Identified

Peter Walker (Carta)

Description: Carta data and research lead (as referenced in the article)
Why mentioned: Argues for smaller, staged seed pools
Quotes: "Carta's Peter Walker argues founders should open at 8% to 10% and grow the pool each round, because startups now hire fewer people at seed."

Ruben Dominguez

Description: Author of the newsletter post
Why mentioned: Created the guide and toolkit; shares a personal observation on the value of the country-by-country tax data
Quotes: "i expected the country tab to be the boring part of this guide. Building the toolkit, it turned into the tab i'd send a founder first."

5. Operating Insights

Size the pool to the hiring plan, not to the investor's default. "If your hiring plan only needs 10%, show the investor the plan." Since the top-up is funded pre-money by founders and earlier investors, every extra point comes straight out of founder ownership.

Model the top-up dilution before negotiating. The article gives the formula: "New pool shares needed = p × E ÷ (1 − i − p) − P, or zero if the pool is already big enough," and "Price per share = pre-money valuation ÷ (E + P + new pool shares)." In the worked example, a $6m raise on a $25m pre-money with a 12% pool takes founders from 70% to 53.4%.

Design exercise terms around employee affordability and plan for tender offers. With exercise rates falling and secondary sales rising, the article recommends "a vesting, leaver and exercise-window policy you can paste into your handbook" and a "tender-offer playbook for when employees want cash before an exit."

6. Overlooked Insights

The EU is considering a single optional option scheme. "In March the European Commission proposed one optional option scheme for the whole EU." If adopted, this could reduce the country-by-country fragmentation that currently complicates cross-border hiring.

Raising the UK EMI limit is a quiet but material change for UK startups. "The UK doubled its EMI company limit to £6m on 6 April 2026." A higher company limit lets more growth-stage UK companies keep using the tax-advantaged scheme, though the full implications sit in the paywalled country section.