Truths about ESOP 101
After working in multiple fast growth startup’s and having been part of multiple buybacks as well as being in the startup ecosystem for a decade I want to put to bear my pov about creating wealth through ESOP.
Like any other randomised event, ESOP also follows Pareto principle which means a very small number of people within the company ever make sizable wealth that they elevate to the top 0.1% of the country.
The Pareto also applies with companies; significantly small minority of companies in India have employee friendly policies which enables an employee to create wealth.
Most startup’s have dark patterns within their esop policy which either locks you in for insufferable durations or forces you to pay exorbitant taxes to gain the right to exercise your esops when you are leaving the company.
Survivorship bias plays a huge role in enabling the narrative that esop is a great wealth generating tool leading to rude awakening for an employee after they join a company.
This doesn’t mean you can’t make wealth, it just means don’t get carried away by narratives and take preventable errors in your career.
Always talk to multiple people in startup’s and ask relevant questions to understand esop policies better.
Like everything else optimising only for esop for wealth creation will mostly not result in it.
