Equitybee is a marketplace that connects startup employees with accredited investors who can help them exercise their stock options. Startups often offer their employees stock options as an incentive to join the team. But exercising stock options when the time comes can be expensive and may prevent the employee from benefiting from the company they helped build.
That’s where Equitybee comes in.
Invest in startup companies like SpaceX and Stripe
- Access past valuations by funding employee stock options
- Invest alongside major VC firms
- Sign up as an accredited investor
Equitybee: Is it worth it?
|Verdict: Equitybee is a platform that is best suited for an accredited investor who is comfortable with the risk of investing in startups that may very well fail. The $10,000 minimum investment and 5% initial fee mean that this platform requires an upfront commitment that newer investors may not prefer.|
What is Equitybee?
Equitybee is an online fintech platform that helps startup employees benefit from the success of the company they helped build. The platform connects startup employees with an accredited investor network that can fund their stock options.
An accredited investor is a high-net-worth individual who’s earned more than $200,000 annually over the past two years, or who has a net worth of at least $1 million. A few other factors may qualify you as an accredited investor.
Accredited Investors may also benefit from the access they get through Equitybee to early-stage startups that aren’t publicly traded on the stock market.
Equitybee, Inc. was founded in Tel Aviv, Israel in 2018 by childhood friends and co-founders Oren Barzilai, Oded Golan, and Mody Radashkovich. The trio got the idea for the company after seeing several friends lose money because they were not able to access their stock options when the startups they worked for were acquired.
In 2020, Equitybee expanded its operations into the U.S. and is now headquartered in Palo Alto, California. The company received funding from Group 11, Greenfield Partners, Battery Ventures, and other venture capital companies.
Today, Equitybee has more than 35,000 members and has assisted in over 4,000 funding transactions in 600 startups worldwide.
How does Equitybee work?
Equitybee makes it possible to invest in private companies by enabling accredited investors to fund startup employee stock options.
A stock option is a contract that enables an employee to become a shareholder when their company has a liquidity event. A liquidity event can be an acquisition, merger, or initial public offering (IPO) that places the company on a stock exchange. That’s why a stock option isn’t an actual share in the company, but rather an agreement to acquire a share in the future.
Employee access to stock options
Because most startups are privately owned, they can’t offer exchange-traded shares to employees or investors. Instead of issuing shares, some startups may offer their employees stock options.
However, acquiring stock options may come with an upfront cost that includes the stock option purchase price and any potential taxes. This upfront cost is locked in with the stock options because they have no valuation until the company experiences a liquidity event. That’s why some employees may need funding to use their stock options access.
Equitybee enables employees in high-growth startups to get the funding they need by connecting with accredited investors for free. Once the company goes through a liquidation event — for example, when it goes public — the money locked in the stock options can be liquidated, potentially with a positive gain for the employee and the investor.
Employee riskAfter liquidation, the original funding amount plus interest and a portion of the employee’s stock value go to the investors that helped them fund their stock options, which reduces their potential future gains. On the other hand, the employee wouldn’t owe investors anything if the company fails.
Accredited investor access to stock options
As an accredited investor, Equitybee enables you to begin investing money in high-growth startups that can otherwise be inaccessible. These startups operate within various industries, including financial services, health care, cybersecurity, robotics, biotech, and more.
You can help employees fund their stock options through Equitybee. In return, you may get your initial investment back plus interest, and a portion of the stock value when the company goes through a liquidity event.
Equitybee has a $10,000 minimum investment requirement. The platform charges a 5% platform fee upon funding a stock option and also charges another 5% of any profits the investor makes following a liquidation event.
Accredited investor riskInvesting money in startups can be highly speculative and carries a lot of risk. Stock options can be highly illiquid, and your investment will be lost or frozen if the company fails or never goes through a liquidation event.
Who can earn money with Equitybee?
You must be an accredited investor to invest through Equitybee. This means you must meet at least one of the qualifications set by the U.S. Securities and Exchange Commission (SEC):
- Have earned an annual income of more than $200,000 in each of the past two years and expects to earn the same in the current year
- Have a net worth of over $1 million (not including the home you own)
- Carry proof of proper education or specific professional certificates, such as FINRA Series 7, 65, or 82
You must also invest a minimum of $10,000 to participate in stock options funding on Equitybee.
How much can you earn with Equitybee?
You may make a decent profit when you invest in a startup through Equitybee that eventually has a successful liquidation event. Some startups on Equitybee that have had a successful liquidation event include Unity, Airbnb, Affirm, Coursera, Payoneer, and 23andMe.
As an accredited Equitybee investor, you make money if the startup employee you helped makes money. After a liquidation event, the employee repays you the original funding amount plus interest and a portion of the stock, either in cash or shares.
However, you may lose your investment, or access to it, due to several risks you take when investing on Equitybee.
Equitybee investment risks
Equitybee raises the following risks to you as an accredited investor:
- No share ownership: When you invest on Equitybee, you don’t actually own the stock options or the shares they may represent, even following a liquidation event.
- Investment freezing: If the startup never has a liquidity event, you will not be able to pull out your investment. This basically freezes the money you invest because Equitybee has no secondary market.
- Investment loss: If the startup fails or goes out of business, you lose your investment, and the employee you helped is not required to pay you back. It’s estimated that 90% of startups fail.
- Contract breaching: The startup employee may breach their contract without giving you your original investment or your stock share. In that case, Equitybee would take legal action against the employee in an attempt to enforce the contract terms.
That’s why it’s essential to carefully consider the startup you invest money in. Once you sign up as an accredited investor with Equitybee, you can access hundreds of startup investment opportunities. You’ll also be able to customize a wishlist of the types of companies you are interested in.
How to open an account with Equitybee
Opening an accredited investor account with Equitybee is easy. Simply follow these steps:
- Select sign up as an investor on Equitybee.com.
- Enter the country and state you live in.
- Select what qualifies you as an accredited investor.
- Provide your full name, email address, and phone number. You can also opt in to receive text messages.
- Once you have created your account, you can access the Equitybee platform. There, you can see various startup companies.
The Equitybee platform enables you to create a wishlist of where you want to invest your money. You can choose to add specific industries or companies to your wishlist. Once you invest in a startup on the platform, it will appear under My Portfolio.
FAQs about Equitybee
What percentage does Equitybee charge for investments?
Equitybee charges accredited investors an upfront fee of 5%. If the startup you invest in has a successful liquidity event, you also pay another 5% of the profit you make on top of your original investment amount.
Is Equitybee legit?
Yes, Equitybee is a legitimate fintech company that was founded in Tel Aviv, Israel in 2018 and is now based in Palo Alto, California. The company has helped more than 1,700 startup employees exercise their stock options with the help of accredited investors. Some startups on the platform have had successful liquidation events, including Airbnb, Affirm, Coursera, Payoneer, 23andMe, and Compass.
When can I get my invested money back from Equitybee?
You can get your invested money back from Equitybee when the startup you have invested in has a liquidity event, such as a merger, acquisition, or initial public offering.
In a successful liquidity event, the startup employee can exercise their stock options and become a shareholder. The employee then pays you back your initial investment, plus interest and a portion of the stock value in either cash or shares.
Keep in mind that you can lose your investment if the startup goes out of business or never experiences a liquidity event.
Other investment platforms to consider
If Equitybee doesn’t appear to be the platform you want to use to invest in startup companies, you can consider alternatives.
EquityZen is another online platform that enables you, as an accredited investor, to invest in private companies that haven’t gone public yet. The platform connects shareholding employees looking to liquidate their private shares with accredited investors. EquityZen enables you to invest in funds that contain a single company or funds composed of several companies.
Read our EquityZen review.
AngelList Venture is an investment platform connecting angel investors with startup founders. The platform acts as a fundraising tool to get startups the capital they need while providing accredited investors with equity in the companies they help fund.
Read our AngelList Venture review.