Schufa recently took over the Berlin fintech Bonify. However, employees see nothing of the money. The case illustrates the risks of participation programs.
Once again there is controversy over a participation program at a startup. When the Berlin fintech Bonify announced the sale to the credit agency Schufa in December, there was much to be said for a successful exit. Schufa is said to have paid around 20 million euros for the takeover.
Bonify’s 30 or so employees should also benefit from the deal – at least on paper. Because, as is usual in the scene, many of them were involved in the company, which was founded in 2015, via a participation program (ESOP). That means: As compensation for lower salaries, they received company shares that can be worth many times over in the event of an exit. Former young companies such as Zalando or Wunderlist have illustrated this.
‘Unfavourable’ round of funding shatters ESOP promises
But that shouldn’t happen at Bonify, like the industry portal, despite the takeover worth millions Finance Forward reported. The employees should not receive any money. The startup justifies this with a round of financing at the beginning of the Corona crisis in the second quarter of 2020, which had to be carried out “under very unfavorable conditions for employees and founders”. “Therefore, in light of the terms of the ESOP (…) there will unfortunately be no payments to our team members as part of this transaction,” Bonify employees recently learned via email.
read too
The company is alluding to so-called liquidation preferences. These regulate which shareholders receive their money first after an exit. If the final price is not enough to meet all previous preferences, employees get nothing in favor of the investors. This is all the more bitter when you consider that startup employees have usually worked a lot of overtime.
The Bonify management around founder and CEO Andreas Bermig is therefore trying to limit the damage. According to Finance Forward, the startup wants to organize a team event as an alternative. “To thank you for your contribution, we will organize a small barbecue and a party in the summer for all current and former Bonifyers,” quoted the industry portal from an email. The campaign is said to have not been well received by former employees, which is not surprising.
Not the first problem in Berlin
Even under normal circumstances, the deal would not have made Bonify employees millionaires. The exit sum was simply too small for that. Nonetheless, the case illustrates the risks associated with equity programs. Because despite promises to the contrary, financial benefits from ESOPs for employees are not guaranteed. This does not always have to be related to liquidation preferences. Sometimes there are special regulations in the contracts or even bad intentions on the part of the founders.
read too
In the past, Gründerszene reported about the Berlin startup Fit Analytics, which is said to have tried shortly before the exit to buy employees’ shares in the company at greatly reduced conditions. In another case, employees of a Berlin start-up got nothing despite a three-digit million exit, because the founders believed that the buyer was only an existing investor and not a new owner. Depending on the contractual situation, employees can also lose out in the event of termination. Therefore, the following applies: The participation agreements should be studied thoroughly before signing, at best even with the legal help of a lawyer.