Fables Of ESOP: A Month of Mega ESOP Buybacks — May 2021
While April was a record-breaking month in many ways, it was a rather lull month in the world of ESOPs with just a couple of highlights worth mentioning. Understandably so, as India was grappling with peak of the COVID tsunami. The good part as we welcome June is that the worst is over and situation is getting better across cities. It’s also heartening to note that several startups and their investors are running vaccination drives for their employees and partners to get their community vaccinated as soon as possible. In this regard, it’s good to note that several startups are internally tracking the percentage of their workforce vaccinated and making arrangements to get fully vaccinated. The overall initiative of the founders and ecosystem stakeholders is quite commendable.
In this edition of Fables Of ESOP, we talk about the couple of large ESOP buyback deals executed late last month and over this month. Another admin announcement — we’ll be soon launching an #AskTheExpert series to demystify several concepts for startup stakeholders with regard to ESOPs, Investments and Equity Management. We endeavour to bring to you the renowned experts from the industry on this series to answer your queries. So stay tuned to #FablesOfESOP on this.
ESOP Roundup — May 2021
During May, we witnessed a couple of large buyback transactions announced by two distinctly different stalwarts of our startup ecosystem — Udaan — a funded unicorn (announced late April, which was not covered in the last edition) and Zerodha — a bootstrapped unicorn. Also, Tredence — an AI engineering and analytics company to announced a $3.5 million ESOP buyback for its early employees notably coinciding with their Series-A funding itself!
Buyback Transactions
Udaan: $23 million (INR 175 Cr) Buyback
Late April, Udaan announced a massive $23 million ESOP buyback program. After Flipkart’s 100% buyback of all vested options in 2018, this seems to be one of the largest buyback in Indian startup ecosystem in the recent years along with Zerodha which announced its program later this month. All employees with vested options as of March 31, 2021 eligible for the buyback
Zerodha announced a INR 200Cr ESOP Buyback Program
Zerodha announced its second buyback program this year with a massive INR 200Cr pool. It has bought out ESOPs worth INR 65Cr last year. Notably this seems to be the first bootstrapped unicorn that has announced its buyback in successive years.
Key Highlights
- Zerodha has valued its company at $2 billion for this ESOP buyback, doubling its valuation from the previous buyback announcement.
- The buyback is open to its 850 employees. Employees sell upto 33% of their ESOPs as per the announcement.
It is also interesting to note that Zerodha plans to do buybacks every year.
Tredence manages an early buyback at its Series-A round!
Tredence announced a $3.5 million buyback program at the back of a $30 million Series-A round of funding in providing relatively early liquidity to its early employees with a pool size amounting to over 10% of the overall funds raised. Typical pool sizes of ESOP buybacks in previous transactions have been in the range of 5% to 10%.
Key Highlights
- Program is open to 750+ employees worldwide
- Eligible employees can liquidate upto 50% of their vested options
- The price is 6x the book price of each unit creating massive wealth creation for employees
- Tredence has an overall ESOP pool of 25% which is quite massive for typical startups at Series-A stage
Other News
Earlier this month, we at Qapita, also announced our partnership with Algo Legal to mutually strengthen our ESOP offering to startups. Read our press release here. Ravi, our CEO said:
We are delighted to partner with Algo Legal — an industry leader in providing legal services to startups and venture funds. This partnership complements our product with ESOP advisory and structuring expertise. This partnership aims to maximise value, whilst making it easy for startups to adopt well-structured employee equity programs and communicate its value to employees.
In other news, it’s good to see many more founders speak up on structuring friendly ESOP plans and incentivising employees to generate wealth along with them. In a series of interviews that Eat My News did with startup founders and leaders, many founders have spoken about their thought process in structuring and managing ESOP programs in their organization. Here are a few excerpts:
Amit Kumar Agarwal, CEO of NoBroker.com makes a vital point about not going overboard in awarding ESOPs to early employees. He also underlined that need to run ESOP liquidity programs to create wealth for employees. He quotes:
“As a company becomes bigger, the need to have outstanding people increases, and there should be sufficient options left in the pool to attract and award them”
Jasleen Kohli, Chief Distribution Office at GoDigit prefers ESOPs generating wealth from a medium to long term horizon as the company delivers fantastic results. While, Samir Bhatia, CEO of SMEcorner sees ESOPs as a critical element to retain good talent.
I also came across this great article from Entrepreneur talking about the spree of buybacks our ecosystem is witnessing quoting founders from Zetwerk, Zerodha, Urban Company, BrowserStack, Meesho etc.
That’s what we have curated from the world of ESOPs for you this month. Thanks for reading. Take care and stay safe until the next edition.
PS: And if your startup needs help in setting up their ESOP plan and managing it through an automated system, do refer them/reach-out to us.
Connected with me: LinkedIn; Twitter (@PrabhuKeDarshan)
