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.