2022 has been the year of ESOP value destruction. Lets collect some real instances here. This silent but deadly phenomenon is hardly reported in mainstream media.
When you play with fire, you get burnt. That's the story of 2020-2022. You're right that a lot of esops issued in this period are probably underwater.
However, the real issue with esops in India in ethics. Too many cases of founders taking advantage of employees by giving verbal commits and not following through, issuing esops and then not keeping the employees in the loop, taking most of the secondaries for themselves rather than distributing it with employees and Angel investors. The list goes on and on.
This has always been the case in India and save for maybe 5% of Indian cos who actually do this the right way, it has continued to happen and the pragmatist in me believes that this will continue to happen.
True that. Certainly most of the stuff going on would be unethical rather than blatantly illegal. M&A can be a ripe situation for owners (and in cases VC backers) to keep ESOPs out of the structure. Such situations need to be called out.
The list here would include
Employees have faced issues ranging from complete ESOP writeoff to getting secondary at a very low valuation compared to last round to in some weird cases having to borrow to pay the tax and seeing the value of the ESOPs fall drastically post listing. Most of the these are hidden from media. These should definitely be bought out.
Also majority series B+ founders take the lion share of ESOPs - and this is reported by the gullible traditional media as the company indulging in some great social service/spreading the moolah. Another issue worth calling out.
Businesss reporting on startups has to move from useless metrics spent Rs 1.x to make Rs 1 to some of these real issues. Founder employee dynamics is something that should definitely get more coverage.
I am not sure how many people made money of esop, its should be less than 1% of startup industry. Plus top that with different gimmicks company put rules around those esop
Paper money goes to 0 🤣
After reading this article, it seems like early players who have become big had the fortune of liquidity. What do you think about more recent startups in last 5yrs or so?
https://www.moneycontrol.com/news/technology/esop-cashout-events-...
Where did you work and how much money did you make?
Asking as it looks like a lot of promise of ESOPs and wealth creation has failed employees in this bloodbath slow growth, layoffs, and job changes.
I have had ESOPS in 2 companies #1 - company got acquired ..I got 45 Lacs IN ESOP ...thats 1.5X of my last annualize...
This post is for younger minds to not fall for ESOPs as a wealth creation tool.
Why do I say that?
ESOP pool is generally less than 10% of total equity distributed among thousand and ten thousands of employees. The share you get is mi...
