Salto X is an innovative platform that enables token incentive plans for remote startups. Thanks to this project, users will be able to create company tokens, as well as distribute and manage them on the Salto X platform. Customers will also have an opportunity to share the company’s success with contributors – employees, advisors, contractors and freelancers, board members, and remote employees wherever they are.
Salto X has an important goal. The post-pandemic world has brought some profound changes in building startups. One of them is building remote-first teams and, thus, accessing the best talent irrespective of location. That means relocation to the United States and Silicon Valley is no longer a precondition to gaining access to venture funding. Instead, people can have their legal HQ in Europe and build fast-growing companies.
In the United States, 8% of the working population participate in equity incentive programs. On the other hand, there is hardly any data on this in Europe. However, equity incentive schemes are crucial for startups if they want to hire and retain top talent in the competitive tech talent market. Unfortunately, issuing and managing equity incentive schemes isn’t easy. That comes with many unresolved issues.
For example, the biggest issue for Europe-based startups is the employee stock option programs (ESOP) due to their taxation and complexity. Without synchronized pan-European regulation, issuing employee equity incentives is a country-specific endeavor. And it often involves unreasonable set-up costs and an upfront tax bill.
What are other problems that users need to overcome?
The rise of remote work has added complexity to the already difficult situation. Companies hire many more contributors not as direct employees but as freelancers, contractors, or employer-of-record companies. Early-stage startups often find these barriers so prohibitive that the promise of shared equity incentives stays as just a promise. ESOP programs become necessary to raise various new venture rounds until later stages.
Salto X interviewed dozens of the fastest-growing companies HQ-ed in Europe. They say that the hurdles don’t cease to exist even for those firms that managed to issue equity incentives. In addition, secondary market sales prove to be one of the most complicated challenges.
In 2022, many startups will likely see their valuations squeezed and runway becoming the highest priority with the funding crunch. Some analysts even forecast that many later-stage startup employees may find the value of their stock option holdings wiped out. However, hearty equity incentive grants could become the key to retaining and attracting talent, especially with market-competing salaries going out of option. The startups seeing their employee grants out of money would have to double down on top-ups at the new market values. These factors put early-stage founders and investors between a rock and a hard place.
What is Salto X’s solution?
The company decided to offer Web3 as an inspiration, as well as part of the solution. The rise of the cryptocurrency community in the masses has already spurred many technological innovations. It also opened new ways of doing things in the software as a service (SaaS) world. Besides, many web3 native companies use their platform’s native tokens to incentivize their users and the broader community. That also helps to raise funding.
The platform’s native tokens are typically not tied to any firm’s equity cap table. Despite that, they still fulfill the objective of sharing value and upside created by the network’s community. The web3 native startup approach inspired the Salto X team to look deeper into ways of sharing the economic upside of the startups. At the same time, the company can bypass the red tape that usually comes with equity transactions.
In addition, web3 technology innovation provides a great set of tools that radically transform monetary contracts. As a result, customers will be able to use smart contracts as a means to govern monetary agreements and transactions. Thanks to that, they can avoid errors while executing the agreed transactions. Transparency and traceability also come in handy with using blockchain.
The team also stated that deploying programmable NFTs to replace paper-like certificates of ownership will be very convenient. Users can infuse their non-fungible tokens with dynamic information, such as company value and key performance indicators. Besides, crypto wallets are another benefit. Customers can save their money on their wallets safely and make secure transactions.
How does this platform function?
The Salto X team focuses on solving the problem of contributor incentive sharing. It also believes that web3 technologies are crucial enablers in achieving this mission. This platform is quite diversified, and it offers many functionalities. For instance, users will have access to country-specific legal templates for adopting and incorporating ITPs. They will be able to sign and store them in their company account.
Furthermore, customers can invite different contributor types (contractors, employees, freelancers) as ITP participants on the network. Issuing NFTs to participants as proof of token grants is another advantage, along with minting and distributing token pools with cliff and vesting properties. A smart contract will manage the latter.
Salto X plans to add new features later, including KYC/ AML automation; Legal & Tax compliance for various jurisdictions; Fast token valuation services; and secondary trading possibilities (that involve internal trading between white-listed ITP participants).
In addition, the company grants the users options to acquire unique company-based tokens issued by Salto X, but only under the authorization of the company’s shareholders. However, the tokens offer the economic benefits of ordinary shares without governance and decision-making rights.
The company will redeem tokens pro-rata for the shares the shareholders sell. In case of an exit event, the token value will peg to the value of ordinary shares in a pre-set ratio. Until then, tokens are deemed worthless, though. Salto X will divide exit proceeds among outstanding shares and tokens.
According to the team, the tokens won’t give the participant a right to vote, a right to receive dividends in the company, or a right to an actual share. Moreover, the participants won’t have any control over shares or actions with the shares. Instead, they will be entirely dependent on the decisions of the shareholders to sell or not to sell the shares.
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