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ZippyBanana
ZippyBanana
Stealth

Are ESOPS really worth it? Has anyone built considerable wealth through it? Share experience.

Please share how your company esop policy is. Is it really valuable for employees or just used to create hype and retail talent. How many years can you exercise them after resignation? How did the taxation go if someone has been lucky enough to convert it to cash? Should esops be a factor while leaving current company or joining a new company?

19mo ago
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DizzyWaffle
DizzyWaffle
Stealth19mo
  1. If you are an early employee or have decent esops, do consider them seriously.
  2. Esops would be valuable in 5-10% cases where next round is raised (and you get some exit) or in less than 1% cases of beinf acquired or IPO/some exit. Consider if your company/business falls in those.
  3. 1 and 2, need luck, and hence only if you are super lucky, will you get exit within 2-3 years. Typically patience is needed, 7-8 yrs ay least. Conversely, if your company survives and throves that much time, chances that your esops will make money are very high.
  4. Esops exercise after resignation- depends on co policy. Read it carefully. M
  5. Taxation - usual brackets. As declared by IT act apply.
  6. If you have decent esops, it will be a factor while leaving or joining. Don’t be surprised though if the new company doesn’t value your old company esops value.
GroovyLlama
GroovyLlama
Stealth19mo

I hope I am understanding this correctly. You have to pay from your own pocket whenever you want to exercise those esops (in case of any monetization event). Only in rare cases where FMV > exercise price, you get the difference..and that's your upside..

DizzyLlama
DizzyLlama
Freelancer19mo

No,
You have to pay exercise amount + the tax on the value of ESOP. Say your ESOP unit Is worth 10k and exercise price is 100. You pay 100 and tax on 10k-100 as per tax bracket.

Now, you own the actual stock, instead of stock option. When you sell it, the difference between FMV and stock price is the profit/loss for you. Depending on when you sell it, you either pay short term capital gains or long term capital gains on it

GroovyMarshmallow
GroovyMarshmallow
Stealth19mo

Majorly a scam exercised them many times but had a selection in startups where I worked. Most of my other friends were not able to exercise it coz the company’s went bankrupt/ failed as CTO exited.

ZippyBanana
ZippyBanana
Stealth19mo

Had a selection? Means?

GroovyMarshmallow
GroovyMarshmallow
Stealth19mo

I knew founders and they were my friends same goes for VCs that invested. I knew what the future held for the company

GoofyDonut
GoofyDonut
Stealth19mo

Got an opportunity to exercise recently from my old company as they raised a new round (2y after I left).

Should be a factor only if you’ll lapse out on a significant amount of grant. Some startups have monthly vesting.

PS. It was a small amount, also didn’t exercise cause the new round was at a lower valuation 🙃

ZippyBanana
ZippyBanana
Stealth19mo

Mind sharing company's name? Why did you decide to not exercise in the liquidity event? Please share what your reasons were, thanks

GoofyDonut
GoofyDonut
Stealth19mo

Small org, can’t reveal without doxxing. Didn’t exercise as I mentioned, lower payout than expected. Will consider in the next round

QuirkyMochi
QuirkyMochi
PhonePe19mo

Know multiple people at Flipkart who have made 2-3crs just from esops.

DancingPenguin
DancingPenguin
Student19mo

+1

PerkyKoala
PerkyKoala
Flipkart19mo

God to have joined Flipkart 7-10 years ago, just be a millionaire without doing anything extraordinary.

JumpyPretzel
JumpyPretzel
Stealth19mo

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