Financing is an unavoidable issue in the life of a start-up. Whether to finance the launch of their project or the development of their activity, many young companies resort to fundraising. This financing method involves the company increasing its share capital thanks to funds provided by investors.

During funding rounds, it is common for start-ups to plan a pool of BSPCE issuance which can be allocated to certain employees or executives. This is to interest them in the company's performance while allowing them to maximize their gain at exit.

In the context of a fundraising, how to integrate the allocation of BSPCE in the road show? How to make it an argument to convince investors? We explain everything!

BSPCE: a tool for profit-sharing in share capital

Attracting and retaining talent is a vital issue for young innovative companies. To achieve this, many of them resort to employee shareholding. Among all the mechanisms, the share subscription warrants for company creators (BSPCE) are the most popular among startups.

The reason for this is that BSPCEs are particularly suitable for start-ups due to the particular conditions, provided for in article 163 bis G of the tax code, which surround their allocation.

These warrants are given free of charge by the issuing company to all employees, or only to some, and offer them the right to subscribe to shares at a price predetermined in advance. The acquisition of the underlying shares allows the beneficiaries to obtain shareholder status and the rights attached to it.

For employees and executives, the interest lies in the possibility of realizing a capital gain when selling shares, in the event of a valuation of the issuing company. For the company, the issuance of BSPCE allows to reward and motivate its employees at a lower cost than the granting of a bonus or a bonus, or the use of another employee share ownership scheme.

How to make the issuance of BSPCE an argument to convince investors in the context of a fundraising?

Investors pay close attention to the team that makes up the company in search of funds. A solid, loyal, and committed team is indeed a guarantee of success for the company. This is why investors attach particular importance to it, in addition to the quality of the product or service offered or the relevance of the economic market.

In the context of the allocation of BSPCE, the objective sought by the company is to retain employees and encourage them to perform. Indeed, the beneficiary employees can only hope to realize a capital gain when selling shares, if the company increases in value. They therefore have every interest in fully investing themselves in the company's development so that the results are the best possible.

💡The allocation of warrants is conditioned by a duration of presence in the company, and sometimes, by performance objectives.

The issuance of BSPCE thus makes it possible to align the interests of the company's founders, employees, and investors towards the same objective, which is the company's valuation.

BSPCEs also allow the issuing company to attract new talent. Investors pay particular attention to the start-up's recruitment strategy, its ability to recruit high-potential profiles to support its growth.

Finally, setting up a BSPCE allocation plan is less costly for the company than granting a bonus or a premium, or setting up another employee share ownership mechanism (BSA, stock-options):

• The warrants are granted free of charge to the beneficiaries,
• The tax regime of BSPCE is one of the most favorable in Europe (no employer contribution).
  
  

How to incorporate BSPCE allocation into the road show?

The roadshow is a fundamental step during a fundraising process. Indeed, it involves the startup presenting its project to potential investors. During this presentation, the challenge is to convince the investors to join the entrepreneurial adventure with a captivating pitch-deck, whilst establishing a trustful relationship with them.

💡Here is an article listing the essential information to build a striking pitch-deck.

Keep in mind that investors are in search of profitability. In this perspective, the BSPCE allocation plan can be a solid argument to defend the company's valuation prospects. Entrepreneurs should indeed highlight the advantages of this employee shareholding scheme and show that it allows to align the interests of the employees with those of the investors. This will also reassure them.

To do this, the founders of the company must highlight the following points during the pitch:

• BSPCEs are a way to retain employees and managers and thus build a loyal and committed team in the long term,
• They allow to motivate the employees to fully invest in the company to achieve the financial objectives,
• They are a way to attract new talents and strengthen the existing team, essential to support the development of the startup,
• The implementation of a BSPCE allocation plan has a limited financial impact on the company.

At Equify, we accompany you throughout the BSPCE allocation process (organization of the allocation plan, drafting of the legal documentation, exercise and subscription of the underlying shares, etc.).

We also allow you to easily execute your fundraising: organization and sharing of your corporate documentation in the context of due diligence, signature of your documentation (shareholders' pact, subscription forms, etc) and updating of your social registers.