2021 ESOP Roundup: The Year of Employee Friendly, Inclusive Schemes & Record Buybacks
A Happy New Year to all of you!
2021 has been an unprecedented year for Indian startups from several angles. Apart from the record number of unicorns created and the largest quantum of capital that Indian startups raised, we also noticed a substantial increase in the number of startups raising funds at an early stage.
On the employee side, we are also seeing a large numbers of professionals and freshers considering a career in startups as these well funded startups are able to offer both the right opportunity and attractive incentives to bring together and retain good talent.
2021 Summary: 40+ Companies, $400m+ worth Buybacks, 4 IPOs, 12,000+ Employees
Perhaps this @PeakBengaluru joke summarises it well. :)
Jokes apart, 2021 saw ESOPs becoming a mainstream reward instrument for startups and employees. Suddenly ESOPs are not just that one-liner on your offer letter, but have become a real tool to achieve financial independence early in one’s career.
2021 saw record number of employees achieve that —
Thanks to $400+ million worth ESOP buyback programs and an additional $800 million liquidity enabled through several startup IPOs.
Thus, employees in Indian startups have unlocked a Unicorn’s worth (>$1 billion) from their ESOPs (that is 12x of what was unlocked in 2020!).
Here’s a quick list of the companies that have done ESOP buyback programs of quantum higher than $10 million.
Overall about 40 companies have executed buyback programs amounting to over $400 million worth liquidity enabled for employees, based on news shared in the public domain.
Do DM me for the full list.
December 2021 Roundup: Urban Company & Spinny announce Buyback Programs
Sticking to our monthly ritual, here’s a quick round of the ESOP liquidity programs announced during December.
Urban Company concludes ESOP Liquidity worth $7.3 million
Post their $255 million fundraise in June 2021, Urban Company announced their fourth liquidity program at about 30% appreciation to their June valuation. Couple of interesting aspects:
- Employees with ESOPs were able to offer 100% of their vested options.
- Unlike most other programs which are basically companies buying back shares, this is a secondary sale of shares purchased mostly by existing institutional investors looking to increase their shareholding.
- About 550 employees participated in the liquidity program
- Again seeing a pattern of ESOP holders holding onto their vested options despite an opportunity to sell. Only about 4.4% of current employees and 10% of ex-employees liquidated their options.
Spinny completes their first ESOP buyback program worth $12
Recently turned unicorn — Spinny, post their $280 million funding round, announced their first ESOP buyback program to benefit current and past employees worth $12 million.
RenewBuy announced their second buyback program worth $1.8 million
Post their $55 million funding in August, RenewBuy announced their second employee ESOP buyback program worth $1.8 million
In other news:
- Singapore based Circles Life announced a $5 million ESOP buyback program. This is one of the rare buyback events from SEA ecosystem. It is as part of their routine liquidity program every 18 months.
- Bootstrapped Fintech company Nuclei announced an undisclosed buyback of SARs (Stock Appreciation Rights). About 102 employees are eligible for the buyback program funded through the company’s profits. Do read my earlier interaction with Ankur regarding Nuclei’s stock compensation philosophy and to know more about SARs.
Apart from inclusive ESOP plans and the largest ever quantum of value liquidated by employees, 2021 also saw ESOPs becoming a mainstream topic as could be observed by activity on LinkedIn, Twitter and other media. Lot many founders, employees and experts are sharing about their experiences and in a way paying-it-forward.
I am sharing a few links and observations that you may find useful:
- Here’s a good video from Creators of Product where Deepak Abbot provides handy tips to find the right balance between ESOPs vs. Salary
- Worried about taxes on ESOPs? Here’s a full download of all tax related questions you might have answered by tax experts.
- If you are setting up your first plan, here’s a curation of best practices from seasoned founders.
Lastly, here’s a very useful database compiled by Meesho’s Shikhar Saxena with ESOP plan related details crowdsourced from employees/founders from about 50 startups. Some very interesting observations:
- Standardization of Vesting Period: Almost all startups in India have a 4 year vesting schedule with a couple in the 5y or 3y zone.
- Increased Frequency of Vesting: Very interestingly majority of the startups (~40%) had monthly vesting post the 1 year cliff
- ESOP Liquidity gaining ground but not quite there: About half of the employees from startups either haven’t heard of ESOP buyback or haven’t experienced one in their startup. So it’s definitely a well begun and half done situation.
- About 80% of the surveyed startups do use a portal to manage ESOPs — that’s amazing!
- About 55% startups offer ESOPs to almost everyone — great datapoint indicating ESOPs getting more inclusive!
Hope you found some of these insights useful.
So that’s a wrap on 2021 #FablesOfESOP. It has been an incredible year indeed! We at Qapita are super excited to be welcoming 2022 as we seek to work with founders to:
- Make ESOP plans customized, employee friendly and more inclusive using technology
- Automate administrative and manual work involving ESOP management and accounting
- Help them to communicate the value of ESOPs frequently
- Provide structured liquidity solutions to enable them to attract and retain talent
Do look us up and reachout if we can help you on any of the above aspects. Wishing you a great 2022!
Connect with me: srikanth@qapitacorp.com; LinkedIn; Twitter
