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Founders’ Guide To Building ESOPs

Founders’ Guide To Building ESOPs

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ESOP (employee stock ownership plan) buybacks have gained immense popularity in India in recent years. But in spite of ESOPs gaining momentum in Indian private markets, several startups are still unsure about the concept of wealth sharing. Some do not understand how the ESOP ecosystem works while others fail to identify the right way of implementing an ESOP policy. 

In this guide, we aim to take startup founders through every aspect of ESOPs, right from various clauses in the ESOP policy and ESOP scheme document to the ESOP process flow, success stories and much more. 

The guide will act as the ultimate resource for formulating your ESOP policy and updating it at different stages. 

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Your Ultimate Guide To Building An ESOP Pool

  • How to draft an ESOP policy
  • How to grant ESOPs at your startup
  • How to evolve ESOP pool across stages
  • How ESOP vesting works
  • How taxation works
  • ESOP templates and more
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Quotes

It is necessary for founders to understand the ESOP ecosystem as a whole – when to dilute equity for the ESOP pool, when to offer ESOPs, which employees should get these, when to grant these, how to design the vesting schedule and how to manage the ESOP stack.

The founders should always keep in mind that the ESOP framework should be designed to ensure that early employees benefit more than the ones who join at later stages as employees who join at growth stages take less risk comparatively.

ESOPs are a boon for an early-stage founder. With ESOPs grants, you will be able to attract talent that will help you further the business cause and expand your footprint.

Not having an ESOP liquidity programme is doing injustice to employees who joined at a very early stage. Ideally, founders should generate liquidity for their employees every three-four years.

I always recommend people who join startups to think like business owners. They need to work hard and align their goals with that of the business owner. Rewards should be aligned accordingly, and this is where ESOPs come in.

Founders should make sure that ESOPs are not just money on paper for employees. ESOP-privileged employees have a right to know the value of their options. They should have a sit-down with the founders and ask questions if they don’t have clarity.


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