I am in discussion with some very early stage startup and if things work out then will be part of the founding team. They have promised to give me same salary as the current company’s salary but give ESOP. Is ESOP worth it if you are founding team member?
The founder has sold his previous company so higher chance of success it looks to me.
Is there any case where person made huge money on ESOP?
Founding and early team is definitely the way to go. Ask about the exit plan of course as you would only be able to cash it out if it exits, gets acquired, or IPOs (*and sometimes during funding rounds)
Can you make a lot of money? Yes, look early paytm early engineers
Billionaire? Hahaha. No. The way to get to a billion is start with a couple hundred million. Go back in time to be born in a richer family 🫂
It's a very long shot game.
In case of company get acquired then it will be sorter period right compared to getting listed on stock exchange?
Billion dollar outcome as an employee is unlikely and so far hasnt happened ever … globally.
But ESOPs can give outsized returns, even in India. In India alone: there’s been $400mn esop buy backs in 2021, reported $160mn+ in 2022 and Flipkart announced there $700mn buy back.
There’s been a growing trend of small ticket buybacks by the time a startup raises Series B as well. Still not necessary that you experience that.
Chat with the founder, understand their exercise cost, policy, window, vesting schedule. How do the founders even think and feel about ESOP liquidity? Have they given enough thought to this as well and do they themselves understand these securities?
Also, are these typical esops or SARs that can provide a cash outcome instead of you exercising your options and paying money.
I’d always suggest that value equity. You can earn salary anywhere but working at a startup for 2-4 years and walking away with decent vested options can MAYBE open up some outsized returns to you in the future - jackpot.
Nope. Definitely not worth it as a pre market fit startup. You'd have to spend much more time working and that doesn't even guarantee that the startup will succeed.
You'll be devoting atleast 5-6 years of your time for a 1% chance to get sizable returns on it if the startup succeeds.
It's better to join a public company if you really wanna make money. Because there atleast those stocks can be encashed.
It really depends on the esop policies as well. For early stage startup make sure the policies are in place and you get official information.
I’m considering joining as a founding engineer at an early stage startup who is just about to sign a $4M seed round.
They offered to match my current base and a $20,000 in ESOPs.
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