Equity, or the practice of granting stock as part of employee compensation, has become a de facto perk in U.S. tech companies. The practice is a Silicon Valley norm, thanks to the success of early employees at major tech companies that went public, such as the so-called PayPal Mafia, the fabled cohort who worked at the payments company and went on to found some of the world’s biggest tech companies after its exit, from Yelp to YouTube. 

“The story of Silicon Valley is employees get to reap the rewards of equity, and that gives them sufficient financial freedom to keep taking more risk investing,” said Juan Pablo Buriticá, senior vice president of engineering at the heavy equipment platform Ritchie Bros. and an advocate for software developers in Latin America. “It creates an incredible upward mobility in society.” 

While granting equity is a common practice in U.S. tech companies, the practice is sporadic in the Latin American tech ecosystem. After hearing that equity was underdeveloped from the region’s tech workers, Rest of World completed a survey in partnership with Blind, an anonymous professional network, to find out how Latin America’s companies approached compensation. The findings demonstrate that Latin American tech companies grant equity at a much lower rate. That can have negative effects for the region’s tech ecosystem, according to four experts interviewed by Rest of World

“There is a narrative [in Latin American tech] that we’re giving equity to everyone,” Buriticá told Rest of World. “These numbers paint a different picture.” 

Blind conducted an online survey of 203 verified professionals in Argentina, Brazil, Chile, and Colombia across 19 technology companies, as well as 3,917 verified professionals in the United States, to understand whether tech workers were offered equity. These could be either in the form of stock options, which give employees the right to purchase company shares at an agreed-upon price, or restricted stock units (RSU), which are company shares granted over a period of time.

The findings demonstrated that while tech companies in the United States and Latin America offered employees stock options at a similar rate, employees in the United States were five times more likely to be offered RSU by their company. While RSU grants typically have a lower upside for early stage employees, they also function as a less risky form of compensation because employees do not have to purchase the shares.

Bismarck Lepe, the founder of Wizeline, a technology services company, and Ooyala, a video content workflow platform, told Rest of World that “equity changed my life.” As an early employee at Google, Lepe received equity, which offered a windfall that allowed him to pursue entrepreneurship. “Equity — if you’re at the right company — can springboard,” he said. For that reason, both of his companies offer equity to employees. 

But unlike in Silicon Valley, the value of equity can still be blurry in Latin America. Eric Pérez-Grovas, the co-founder and general partner of the Mexican venture firm Wollef, said that Latin American employees tend to prioritize jobs with higher monetary pay and don’t consider leaving behind a greater value in their stock options. “A bird in the hand is worth two in the bush,” he said.

Only a few of the region’s tech companies have had major exits — either through initial public offerings or by being acquired — including Brazil’s Nubank, Argentina’s Auth0, and Uruguay’s dLocal. It has meant that employees haven’t been able to see the value of equity in practice. Lepe said that despite offering equity at both Wizeline and Ooyala, 70% of employees did not exercise their stock options until they began to see examples of successful liquidations.

Buriticá told Rest of World that until recently, “founders [could] get away without offering equity because they don’t have to compete.”

More recently, that dynamic has begun to change, as U.S. companies increasingly hire in the region. Latin American tech companies that don’t offer equity are at a disadvantage.

“Another company will offer them equity and win them over,” said Andrés Barreto, a Colombian-American entrepreneur and investor who is currently the managing director at Techstars Miami. “It’s bad for Latam startups that hope to retain the best talent while paying poorly and offering little or no equity.”

Experts say that failing to offer equity could also stunt the growth of the ecosystem in the long term. Without successful exits and employees reinvesting their gains, the money instead goes to VCs from outside of Latin America. “Since most of the investment is coming from outside of the region, it is a value extraction from the region, and founders are helping it happen,” Buriticá told Rest of World