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DizzyNugget
DizzyNugget
Stealth

The ESOPs lie

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 miniscule. Founders saying that the pie will be big enough so that this percentage will matter is a hyper-optimistic prediction with nothing to back it.

You have to ideally wait till IPO to even make the miniscule amount. Very few companies buyback and fewer will do post-ZIRP

ESOPs only give you the option to buy not right to buy. Company can in some circumstances take that right away. People in positions of power should negotiate for rights not option.

The success rate of startups is less than 10% which means the chances of this miniscule amount is low.

Overall, lowering your salary for more ESOPs won't make sense unless you are convinced that the startup will go big.

8mo ago
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WobblyPanda
WobblyPanda
Freshworks8mo

ESOPs? More like a lottery ticket with terrible odds. Founders' sweet talk can't turn a mirage into an oasis. "Sab moh maya hai" (It's all an illusion). Are you betting your future on a coin flip?

Gif
BubblyNoodle
BubblyNoodle
Stealth8mo

This is correct. It’s a gamble with terrible odds but pays off well if you win.

SqueakyPenguin
SqueakyPenguin
Stealth8mo

ESOP options don’t mean “right to buy”. The word option signifies “right to exercise”. That is its up to you if you want to exercise the options to get full shares. Companies can’t just refuse to give shares as you mentioned

DizzyNugget
DizzyNugget
Stealth8mo

I didn't word that well. I meant right to exercise but it has to be bought. Btw, read terms and conditions properly, companies can refuse that.

MagicalPickle
MagicalPickle
Stealth8mo

Absolutely! It's a trap

DizzyLlama
DizzyLlama
Freelancer8mo

You are correct

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