Behind the scenes of any one of today’s successful startups, you’ll find a maze of complexities and moving parts. As young companies grow, so does the paperwork. From managing health insurance benefits to overseeing perks and managing compensation, the to-dos are seemingly infinite. And there is only so much administrative legwork that companies can keep in house. That’s where eShares enters the picture.

Making Manual Paperwork Easy at Scale

eShares offers equity management solutions to thousands of fast-growing startups across the United States, simplifying operations leaders’ (and employees’) lives. eShares is thus heavily involved in the 83(b) election process, which allows restricted stock holders to reduce their tax liability by freezing the spread between the purchase price and the fair market value of the shares on their date of exercise. When employees file their elections within 30 days of exercise, they pay taxes immediately rather than waiting for the grant or award to fully vest.

The challenge with the 83(b) election process is that it’s paper-based. It’s easy for important mailing steps to fall through the cracks. “The only way to do it is to actually write the letter and send it to the IRS,” explains Josh Merrill, head of product at eShares. “Historically, the company’s legal counsel is responsible for making sure that everyone who should file an 83(b) does. Companies are responsible for doing a withholding on each employee’s income, to pay taxes associated with not filing that 83(b).”

When small details slide, the long-term ramifications can become costly.

“There have been extreme cases in which a startup has done fantastically well, with an employee who early exercised but has forgotten to file an 83(b),” explains Merrill. "As a result, an employee’s tax liability exceeds their income. Companies and their legal counsel need to ensure everybody who's supposed to file an 83(b) election does so. We’ve seen situations where companies have repurchased and undone previous transactions—at price points of thousands of dollars per case.”

On a mission to save startups from paperwork-related headaches, eShares set out to build an automated 83(b) process that could handle mailings on employees’ behalfs. Their search for a vendor led them to Lob’s direct mail API.

“We just didn’t want to be in the business of putting things into envelopes, so Lob was a natural choice,” says Merrill. “After testing it out, we realized that it was the only way to handle the volume we were facing.”

Here’s a behind-the-scenes look into their process.

eShares and Lob

• Streamlining Existing Data. For eShares, building a programmatic mail program wasn’t done from scratch. Instead, Merrill and his team focused on optimizing the data that they were already collecting. “Since eShares is already facilitating these transactions, we have complete data on the company and can determine which employee should be filing an 83(b),” says Merrill. “Implementing Lob’s programmatic mail API meant creating a box that employees could simply check or uncheck. We left it checked by default. The mailing takes care of itself rather than relying on employees to print out IRS forms and go to the post office.”
• Prioritizing Continued Optimization. It took eShares just one day to integrate with Lob. “Because we were sending such sensitive and important documents, we spent most of our time sending test letters to wait for them to either reach our office or the IRS,” says Merrill. “By the time we launched in full, we were confident in our system. The implementation, overall, was really quick.”
• Focusing on the Nuances. The eShares team knows that the smallest details can generate the most widespread efficiencies. “I would say that the most valuable feature has been the ability to send certified mail,” explains Merrill. “These letters go into a taxpayer's file with the IRS, so you need to track them as they're printed, shipped and received. Without the ability to send certified mail we probably couldn't have deployed this feature.”
• Enabling Ease of Use. Even though Lob is a technical tool, Merrill and his team have been able to build non-technical capabilities for multiple teams. “For instance, being able to use HTML and send PDFs has been important to our operations,” says Merrill. “We are basically just generating a web page that’s getting printed.”

Moving Forward

With new efficiencies, the eShares team is building out—you guessed it—more efficiencies.

“Everything we do is about helping our customers save time,” says Merrill. “When we free up our time, we have more brainpower to devote to tackling their customers’ direct mail challenges.”

What’s next on the horizon for eShares?

“We’re ultimately working on helping startups tackle their Blue Sky filing challenges,” says Merrill. “When a company that raises a new round, that company’s legal counsel will need to do some state filings. Most states require paper-based filings. Consequently, we have a new use case for Lob.”

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