(Reuters) - Venture capital firm Index Ventures has rated three Baltic nations as the most “startup-friendly” in Europe after new policies on stock options made it easier for startups to attract and retain employees. Latvia, Estonia and Lithuania led 22 countries including the United States, Britain, Israel, France and Germany in the ranking. “While these policy changes will be welcome news to Latvian and Lithuanian startups...we now need the rest of Europe and the European Union to follow suit,” Index Ventures partner Martin Mignot said in a statement. New Latvian legislation in December gave tax exemption benefits to startup employees, reducing the time they need to hold stock options before they can cash them. Smaller firms tend to let employees acquire a slice of the company through stock options as they cannot always compete with large businesses that offer high salaries to woo employees. With VC-backed investment in European startups reaching a record $41 billion in 2020, the European Commission is also expected to publish its Startup Nation Standard here in March, which will also deal with stock options. Index Ventures, an early backer of companies such as Facebook, Skype and Robinhood, has invested in European technology companies since 1996.