Equity Management Trends and Outlook for 2025
The need for efficient and adaptable equity management solutions is growing every day with the growing complexity of equity structures and the popularity of equity compensation. From 2021 to 2024, the percentage of HR leaders who reported offering equity compensation rose from 65% to 76%.
Similarly, in the past decade, we have seen equity interests like RSUs and tokenized equity transition from uncommon to widespread.
As a result, equity management solutions had to evolve by integrating sophisticated round modeling features, real-time cap table updates, and value-added services like 409A valuation. Businesses are now looking for not just insights into complex ownership structures but also tools that aid in tax compliance.
In the spirit of keeping up with these developments, equity management solutions are trying to leverage emerging technologies such as generative artificial intelligence (AI) and blockchain.
In this article, we will explore such key trends shaping the future of equity management in 2025.
Key Equity Management Trends 2025
Some of the key equity management trends that we are observing are as follows:
Sophisticated software for complex equity structures
Over the years, various forms of equity interests have been invented and popularized. You would only find common and preferred stocks in cap tables a hundred years ago. But now, you will find convertible debt, warrants, employee stock ownership plans (ESOPs), stock options, restricted stock units (RSUs), phantom stock, and even tokenized equity.
As equity structures become more complex, equity management software needs to be upgraded to accommodate these diverse equity interests. Today, you will find various features like scenario and round modeling, real-time cap table updates, and compliance tracking, all of which were deemed overkill a decade ago.
Such innovations are essential for companies who want to efficiently manage their equity structures. Typically, only top-level executives will have the full access necessary for managing equity, a highly time-consuming task. In a large corporation with complex equity interests, this task could take 6-7 hours every week. Given the median CFO hourly salary of $214, this could amount to $1,498 spent on equity management every week. Hence, innovations aimed at saving time have become a necessity.
Demand for leveraging emerging technologies
Over the last few years, two technologies that dominated the headlines were blockchain and artificial intelligence (AI). In comparison to AI, blockchain gained widespread popularity early on. The main utility of this technology was secure, transparent, and tamper-proof record-keeping. Companies realized these benefits and started tokenizing equity. This simplified ownership transfers and contributed to regulatory compliance through secure record-keeping.
The use of blockchain ledgers streamlines cap table management and invites trust from stakeholders because of how immutable and tamper-proof they can be.
Another benefit of tokenized equity is that companies need not revamp their equity structure to encourage the participation of smaller investors. High-priced stocks may seem unapproachable for new entrants to private equity. For someone with limited funds, such stocks may hinder their ability to effectively diversify their investments. However, a company with tokenized equity can issue tokens to fractional shares.
AI, on the other hand, makes equity management more accessible. Generative AI can break down complex equity management scenarios to aid stakeholder decision-making. In the market, you can find various AI-enabled cap table software. Clients can ask the cap table AI for summaries of recent transactions, layman’s interpretations of legal documents, and strategic reviews of proposals. This can significantly accelerate equity management while also making it accessible as all stakeholders such as ESOP-receiving employees may not be well-versed with equity.
Integration of services
In 2024, there is a growing demand for comprehensive equity management solutions. Companies are looking beyond cap table-only software. Businesses seek a mix of cap table software, valuation services, and equity and tax advisory services. As businesses grapple with the tax compliance challenges associated with equity compensation, the demand for 409A valuation subscriptions has increased. These valuations ensure that employees do not face unpleasant tax consequences.
Earlier, cap table software was just a gateway to the other mentioned services. However, now, businesses themselves are seeking service providers who can offer complete equity management solutions.
Rising popularity of equity compensation and 409A valuations
According to the State of the Workplace Report 2024 by Morgan Stanley, 80% of employees and 95% of HR leaders say that equity compensation is effective in motivating and engaging employees. In 2021, only 65% of HR leaders reported that their companies offered equity compensation. By 2024, however, this figure rose to 76%, reflecting a growing trend in offering equity-based incentives.
It is not just that more companies are offering equity compensation. Employees themselves are becoming more aware of equity compensation. In 2021, only 25% of employees said that their company offered equity compensation. However, by 2024, this figure rose to 38%.
As equity compensation becomes more popular, the demand for 409A valuations will also increase. After all, American companies must get 409A valuations to stay tax-compliant if they want to issue equity compensation.
Personalized equity planning and education for employees
Recall that only 38% of employees said that their companies offered equity compensation but 76% of HR leaders reported offering equity compensation. There is a major disconnect between what companies are offering and what the employees are aware of. There is a general consensus that offering equity compensation is effective in attracting and retaining talent.
So, just as companies are opening up to equity compensation, they must also start educating their employees on its benefits. Companies should try to set up video conferences or seminars on how equity compensation can boost wealth creation for employees. Getting their queries answered by experts can help employees understand why equity compensation is valuable.
Additionally, companies can offer personalized equity plans. Employees from different ages and family structures have different financial needs. Some employees may want to save for their kid’s education while others may want to prepare for fast-arriving retirement. Companies could fine-tune equity compensation parameters like vesting schedules and exercise prices to suit the needs of the employees.
Equity Management Outlook 2025
According to Research Nester, in 2024, the equity management software market is valued at $746.59 million. This market is expected to grow at 13.4% CAGR until 2037. If this growth were to actually manifest, the market would grow to $3.29 billion by the end of 2037.
As many as 87% of businesses are either using digital equity management solutions or plan to do so for managing their equity compensation plans. Since businesses have already recognized the utility of digital equity management solutions, the rising popularity of equity compensation could be an important growth driver.
Another important growth driver for the equity management software market is the steady rise in the formation of new businesses and new business applications. From 2014 to 2023, new business applications in the US have grown at a CAGR of 8.35%. This was even though this period encompassed the challenges of the COVID-19 pandemic.
Source: US Census Bureau
If the US entrepreneurial spirit stays strong and equity compensation remains popular, equity management software could see even broader adoption.
Choose Eqvista to navigate equity with clarity and confidence!
Given the high expected growth rate of the equity management software market, it is clear that equity management solutions are becoming a critical resource for businesses. As new businesses form and equity compensation becomes commonplace, more HR leaders and founders are likely to recognize the value of tools that can streamline all aspects of equity management.
Eqvista is an all-in-one equity management software that streamlines share issuance, shareholder management, and ESOP administration, while also providing comprehensive compliance support through filing and 409A valuation service.
