Live AMA: Hey everyone, I'm Kashish, CEO of EquityList. Ask me anything!
Hi folks, I'm Kashish, the CEO of EquityList and Founder of Cloud Capital which I run as a solo GP. A little bit about what we do: EquityList is a full-stack equity management platform by AngelList India. Companies across India, US and Singapore use EquityList to manage their cap table, stock options (ESOP/SAR), shareholders, and related compliances. Managing equity for 10k+ stakeholders, 250+ companies and ~$1B in stock options. Cloud Capital has deployed $8M+ in 55+ startups such as Airmeet, Rupifi, Orange Health, DevRev, ZET (OneCode) and others. I've also angel invested in startups such as OSlash, Atlys, Chronicle, Even Healthcare and others. Excited to do this AMA, and look forward to answering any of your questions about ESOPs, cap table management, investing, entrepreneurship, and more! LinkedIn: https://www.linkedin.com/in/kashisharma
Oh wow, an open AMA.
Have a few questions.
1. How would you like employees to think about their ESOPs? Perhaps, highlight some insights for those coming from MNCs.
2. How do you think about investing personal funds? How has this thinking evolved for you, early 20s to right now?
3. Tell us about your first job. Was it instrumental for you in embarking on your current journey?
Hey salt :)
1. You take a high risk when working at a startup (most don't survive beyond a 3-4 year lifecycle and some end sooner than that). So if you join a startup, I am assuming that you either truly believe in the mission and the market opportunity or have high confidence in the team that you're joining. Either way, owning equity early on at a massive discount (ie ESOPs) is a great way to ensure that your hard work pays off on the off-chance of the startup giving a successful outcome to its shareholders and employees. You should always optimize for asymmetrical outcomes as much as you can, when granted to you.
As Naval says - you’re not going to get rich renting out your time. You must own equity - a piece of a business - to gain your financial freedom.
2. I was terrible at investing my money when I started working. I started off with the usual safer bets ie - PPF, but over the time after dabbling with multiple asset classes, realised that hyper-active personal money management is not for me. You have to truly understand what works for you - can you actively pick stocks, assess mutual funds, or trust a relatively de-risked index fund? Personally, knowing that I set aside a good chunk of my earnings in investments in a disciplined fashion is good enough for me.
3. 100%! I joined an early-stage startup, SquadStack (now Series B, when I joined they must have just raised their pre-seed round). Got a chance to do multiple things - sales, operations, account management, product scoping etc. Loved it. Many of my Cloud Cap LPs or even founders were people that I had known since my SquadStack days. I had a college startup before as well + some online ventures during school days, so I always knew that I loved the startup ecosystem action - gave me clarity early-on.
This is such a GOATed answer. Loved your response. 🚀
The clarity of thought is impeccable. Will forward this to a few nephews and nieces.
Hey Kashish, thanks for this
Wanted to know how you got started out with your own fund?
What did you do prior to that, and how did you raise money for the fund?
Don't personally have a lot of capital currently, but keen to get their eventually in my career :)
Great questions :)
Raising a typical venture fund off the bat is no small feat and is extremely hard. I decided to dog-food our own product at AngelList India - syndicates.
Syndicates are special purpose vehicles created for a specific investment. So using these, I could raise my target amount from a private cohort of investors, allowing me to pool a larger cheque to invest in the company. Did 9-10 of these in 2020 and raised a smaller hybrid fund in 2021. My LPs were operators from the Indian ecosystem (ie Director at Phonepe, VP at Axios, Founder at ABC startup etc). People who trusted me enough or were at least intrigued by the first few investments I made, so they wanted to hop along for the ride.
In order to raise a fund, you need to have a track-record. You need to show your LPs that you as a GP (general partner) have access to promising founders and can secure allocation in competitive fundraising rounds. Syndicates helped me prove just that.
Do note - investing isn't full-time for me. I am an operator-investor; building business is my full-time role (ie EquityList) and investing in startups has always been on the side.
Thank you so much, really appreciate the deep reply
This is such a logical journey, but would’ve definitely not been an easy one :)
The initial pool of people that trusted you, how did it get built? Was it at SquadStack or while you worked at AngelList?
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Hi, thanks for doing this.
I’m planning to do a startup soon:
1. How should i think of giving equity to employees? Are there any benchmarks for those early hires? Like 1% of the esop pool to early sde etc
2. Afaik, esops are options, what should the ideal vesting period be in any employee friendly esop policy?
3. Generally Indian companies are bad at giving esops, policies are not so transparent, how should the companies be approaching it? Ex: my cousin who joined series a company as cto is yet to receive any esop communication although he was promised x% (almost 8 mos now)
Stoked for you! Bold bet and I hope you enjoy every bit of building your startup :)
1. Very subjective. First, do you intend on giving ESOPs only to key hires or say to all of your first 10-20 folks? I deferred to the latter for EquityList btw - everyone needs to have skin in the game. Second, I would do some calculations: how much can you pay today and factor in forward-looking salary growth that your hiring candidate would end up making in the market over the course of the next 2-4 years. I'd factor that in during my ESOP calculations per employee - that the options I offer to them are already worth let's say a steady 20% appraisal for the next 2-4 years. This method is highly subjective and depends on your startup's valuation and how much can you allocate.
Another easy thumb rule is to offer 1:1, CTC:Options as a package; ie 15Lacs of in-hand and options worth 15 Lacs as well. To your more 'experienced' hires who most likely have a Director-level impact on your startup journey, offering 0.8%-1% of the company via ESOPs is a good way to show them how much you value them.
2. 4 years is standard. At AngelList we have a 6-year vesting policy btw; more here: https://venturehacks.com/6-year-vesting
3. Use ESOP management platforms like EquityList (http://equitylist.co/), shameless plug :) This is precisely the reason why we are building EquityList - for the lack of transparency and compliant paperwork. ESOPs unfortunately haven't been communicated well enough because most of the founders don't understand them as well (it's not their core-competency). Use a tool which makes it easier for you to manage ESOPs and for the employees to visualise their options, the worth, costs attached etc.
Point 1 is super helpful. 1% for Directors at early stage. And I’m guessing upto 0.5% for more early career professionals.
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https://www.linkedin.com/posts/peterjameswalker_startup-founders-what-should-you-give-your-activity-7066805030913277952-I3SI?utm_source=share&utm_medium=member_ios
I’d come across this data cut by Carta, and shared on another post today. I wonder if you have something like this for Indian startups specifically?
Mainly wanted to ask what are the differences between how Indian startups are allotting equity vs. how it works globally?
TIA!
Hey AlphaGrindset :)
We are working on this, give us till the end of this year to share a data-backed report with the ecosystem.
Empirically speaking, the data shared by Carta isn't entirely different from the kind of behavior we are seeing in the Indian ecosystem. I guess it's safe to say that the importance of the first 5 hires in your startup is mostly the same across different geographies.
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PJ
Stealth
a year ago
Hey Kaushish,
I have been allotted shares by my company. Around 11 equity shares the value of each being around 2lakhs . We raised our seed funded company. I have been told these are different category of shares than esops. What are these exactly and how do I make the most out of it.
PJ
Stealth
a year ago
Kashish*
We are a seed funded*
ESOPs are carved out of a company's 'common' stock pool. This pool is usually carved out for founders and employees.
When a company raises a new round, they offer 'preferred' stock to the investors - it's a different share class than common because they have certain preferential terms for the investors.
Every time a company raises a new round (assuming it's an up-round), the value of the ESOPs you own also increases, since the share price is now higher than what you got offered when ESOPs were granted to you.
There's nothing for you to do right now since you can't sell them without a liquidity event opening up (buy back, secondary, M&A, IPO). What you can further ask is about the 'Exercise' policy, and if you truly believe in the company's prospect, is that opportunity open to you to exercise? Alternatively, you sit back and wait for a liquidity event to take place.
Asking with all seriousness, you seem like a guy who is now loaded - to do angel investing etc
When and how did your first big break came?
Loaded is subjective.
I barely invested in the public markets when I started off. I just loved and still do enjoy chatting with founders and feel inspired by all the work people are doing around me. Angel investing was quite organic for me, although, technically speaking, it's not the most safest asset class to invest in! It is highly illiquid, very risky, and has a higher ticket size than other investment classes.
Here's what I did - I did 2 investments through a colleague's syndicate - they very kindly allowed me to invest ~INR 1 Lac each in startups that I was excited about.
I then started to actively build my own deal flow, and came across a startup called Fitso. My friend was raving about their swimming pools in Delhi NCR and I went and checked the facilities out. Loved the user-centric approach that the founders had. Got an existing investor in Fitso to make an introduction with the founder. One thing led to another and I decided to cut ~$150,000 from Cloud Capital, as my maiden investment. My portion of the GP-commit was relatively smaller but pooled capital from my LP (investor) base. Fast forward a year and a few months later, Fitso ended up getting acquired by Zomato and my first investment also became my first profitable exit.
Bottom-line, syndicates are a great way to cut smaller cheques. Venture capital has always been limited and accessible to people with larger cheque books but syndicates allow you to invest relatively smaller and still add value to the startup with whatever experience/network you can lend to the founders.
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From a legal standpoint, it's not hard at all. You just need to be cognizant of avoiding any potential angel-tax liabilities. This is how you can mitigate them:
1. Ensure that have a valid and recent Valuation Report and that you aren't pricing your shares more than the FMV (fair market value) that has been derived from the valuation exercise.
2. I'd suggest you use an AngelList India RUV (roll-up vehicle), that allows you to bring together all of your angel investors through this one single investment vehicle. This means that you don't have multiple angels on your cap table that you need to manage. Moreover, AngelList RUV in India uses a SEBI-registered AIF which is exempt from any angel-tax liabilities so there's nothing for you to worry about.
Where it can get a bit tricky is when you have foreign angel investors investing in your Indian entity. The angel-tax liability needs to be solved for (point 1 above) and you'll need to undergo quite the RBI and banking compliance (issuing FCGPR and bunch of other things). I am happy to chat about this in detail with you and help you structure this.
Node
Stealth
a year ago
Y'all hiring? I applied on Wellfound a week ago lol.
Node
Stealth
a year ago
I got laid off 2 months ago. I'll do anything.
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Potluck
Stealth
a year ago
Hi!
What do you make of the trend led way in which most early investors put capital?
Like right now all investments seem to be SaaS/AI. Earlier Web3.
What drives this, is it FOMO? And do you think this will change anytime soon?
Hey Potluck!
FOMO-based investments will always stay, it's a natural investor behavior irrespective of investing in public or private markets.
Startups do benefit from certain headwinds and investors like to capitalise on them. But one thing we have seen time and over again is that first-mover's advantage doesn't last for long.
A good amount of VCs and angels will comfortably sit on the sidelines until frothiness in the markets goes away, and there are equal number of investors who'd like to opportunistically leverage the trends.
I have done some FOMO-based investments myself and in hindsight, those startups have either pivoted to something that's more meaningful to the team or unfortunately shutdown (couldn't raise capital once the market trends died down).
Hi Kashish. I was researching about the pharmaceutical sector of India. I came to know about 90% of the raw materials for drug manufacturing is sourced from China. And then, I hear the business of API shifting to India. I’m really curious if the pharmaceutical business shifting to India will really be a big story going forward, since our dependency on China will remain the same?
Hey fitnesslunch!
I don't know much about the pharma sector so can't comment on this. But I do hope that we start making strides on that front.
Megamind007
Stealth
a year ago
Is PMF a broken concept? PMF sounds good for SaaS startup.
So the big question is what is PMF?
Question: A designed product which is ready to scale, theoretically, needs PMF or not.
PMF is not a broken concept and is definitely not just limited to SaaS startups. But many first-time founders can have a misconception.
Many founders in the earliest of days have subjective PMF definitions, conveniently tweaked to their current scale and performance. There isn't one way to define what PMF is but the basics still need to hold true: great NPS, promising user retention curve, steady and sustainable growth, product generated revenue (the last point is always the most missed out one, doing customer research of 50-100 who might be okay paying INR xx / $yy is not the same as them actually paying for it!).
But PMFs need to be revisited time and over again. Your PMF phase is usually contained within a beach-head market segment that you feel confident about, but things change when you go explore other segments, geographies, introduce different product lines or even when the macro environment drastically flips on its head. Do you still retain your PMF status? So the bottom line is that achieving PMF is not a one-time thing.
High performing companies constantly innovate and avoid the S-curve, and in order to do that, end up re-assessing PMF constantly.
TinyCalico
Stealth
a year ago
What is RSU. Say if I leave the company after vesting then I get them or not? Why do they expire?
RSUs are a type of a stock options plan that typically publicly listed companies adopt. They are in a form of a share or cash equivalent, and have a vesting schedule that is typically time and performance/milestone-based.
Different from ESOPs where you have to exercise your options to own shares in a company. In RSU's, if you meet the vesting criteria then you directly own company stock and therefore a typical RSU grant will not expire.
We wrote a blog earlier on different types of stock option plans: https://equitylist.co/blog/esop101-equity-compensation
Blurvision
Stealth
a year ago
Hey Kashish - Is there an advantage of making good outcomes from esop if joining a series E startup?
Does the later rounds of funding mean lower returns for newer employees?
You are relatively de-risked when you join a mature startup (ie- Series E).
As the share price will be much higher for a Series E company, your return multiple wouldn't be drastically high as well vs if you would have joined that startup around its Series A where the share price would have been much lesser and you could have received a lot more options at a lower exercise price (*).
I would also advise you to assess the company's fundamentals and in conjunction with the market scenario, evaluate if the company has a promising future and is on the right path to eventually delivering a large outcome in the next few years. It may not make sense for you to exercise your options right now as the share price will be much higher unless you can finance it relatively easily for yourself.
Bright side: there could be a lot more liquidity opportunities since you're working at a mature company. Buy backs are much more common around the Series E stage and if the company has started thinking about IPO plans etc then it's great for you to hold-off on exercising and waiting for liquidity event to come your way.
Succinctly speaking: a higher risk leads to a higher reward. Series E is relatively de-risked but at least you have more prospects of liquidity events and the paper-money eventually materialising for you :)
* some companies keep increasing their exercise price as they scale.
Hello Kashish!
I was curious to learn from you about outcome from ESOPs/stocks that you've personally seen. Have toyed with the idea of joining early stage startups, but I feel it's pure luck to be able to get into a Swiggy/Zomato/Flipkart at seed/series A.
Is this view incorrect? Have their been cases where companies did not become over $500Mn in valuation but still gave value to employees for their ESOPs? How does it happen?
For sure!
We are increasingly seeing small-ticket ESOP buybacks from Indian startups over the past 2 years. Startups that may have < $0.5Bn in valuation but have still done a ~$200k worth of a buyback for early employees.
The current market situation has definitely dampened ESOP liquidity for the time being but there are still growth-stage companies planning for IPO and readying themselves to provide liquidity to their employees. Similarly, there is a slowdown in small buybacks as well but I feel that this will pick up once we all come out of this down-market.
You're correct in assuming that the chances of joining the next Swiggy/Zomato early on are fairly bleak and that's why you have to do your homework when approaching a startup - assess the founders, ask the right questions about their runway, business model, fundraising prospects or about current investors; you can at least take a fairly thought through decision today to mitigate the risks. The flip side of a non-unicorn outcome is that you at least walk away with accelerated domain experience.
Hello Kashish,
Awesome to know about your journey. A quick question. How to find an early stage startup company, which has a good growth potential? I would break the question in 2 parts
1. How to identify start up companies?
2. How to value their growth potential
Are you asking as a hiring candidate or as an investor?
Some common frameworks for both:
1. The team: What primes them to build a company in their target market? Do they have the right mix of talent? (sales/engineering/product)
2. Market size: How big is the market that they are in? Bigger markets make it easier for you to survive the early-adopter phase (but can also be super competitive). Are there adjacent markets for you to overlap into if your initial beachhead focus is not big enough?
3. Market timing: Are your potential customers ready to spend $$$s on the product today? A proxy for this could also be the sales cycle of your early traction, unless you naturally anticipate long sales cycles if operating in enterprise SaaS space with $50-$100k+ contract values
4. Early unit economics are always helpful. What's your CAC for the initial set of customers? Is your ACV or ARPU large enough for a decent pay-back period? What are the gross margins like?
5. Shipping velocity: If you're building a tech startup, then hopefully you're shipping fast enough; multiple features and enhancements on a weekly basis. This has a lot to do with the product-building DNA of the company.
In the early stage, it's quite difficult to project growth potential. You're sometimes investing at a pre-product level or with minimal traction, so there's always execution risk that you need to factor in while making the investment.
Hi Kashish,
Connect with me on linkedin, sent request to your profile.
Will send you my business plan related to Socio-religious network for 1.1 billion Hindus as am looking for cofounder and investors.
hesoyam
Stealth
a year ago
You should ask your customers to write “We use EquityList” in job descriptions when hiring, will 100% increase the trust in the founders & the company. Finding companies which give and respect ESOP policies is really difficult.
Awesome suggestion, something we have thought about and should start enabling soon :)
I’ve heard widely that startup employees don’t value Equity anymore and only cash. Have you seen the same? Is this difference from Silicon Valley and only an India phenomenon?
US markets are a lot deeper and liquidity infrastructure has been around for almost half-a-decade. Not to mention, US has already seen a good amount of IPOs and $Bn+ exit opportunities to be able to distribute liquidity to employees.
Indian startups recently picked up pace for ESOP liquidity, Flipkart's acquisition in 2018, ~$440M ESOP buybacks in 2021, and now $700M ESOP buyback for Flipkart alone. We need more such case-studies to cement confidence around ESOPs in the Indian ecosystem.
Another reason why hiring candidates value cash more is that most HR professionals and hiring managers in early-stage startups do not have the right tools to help them relay the value of the offered ESOPs in the compensation plan. There are products in the market that amp up offer letters to help breakdown the ESOP component so the candidates can clearly understand wealth-creating opportunities.
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