You’ve found a company. You had to attract talent. However, they did not have enough funds to pay them heavily. What do you do?
Employee Stock Ownership Plans (ESOP) allow them to own part of your company. As the company grew, you needed top and middle management, and you also tried to woo them with ESOPs. This is the culture brewing in most startups in the country. Apparently, now the practice has reached maturity.
ESOP buybacks worth $100 million Dominated the First Half of 2021
During the first half of 2021, Udaan, the B2B e-commerce Unicorn, has completed the buyback of ESOP worth $23 Mn. Sharechat, the messaging app, has done a buyback of $19.1 Mn worth ESOP from existing and erstwhile staff. The list of other startups which have gone on this way includes Razorpay (10 Mn), Zetwerk ($8.3 Mn), and Cred ($6.2 Mn).
The year 2020 also witnessed a heavy buyback spree from the companies. Zerodha, the financial services company, led the pack with a buyback worth $9 Mn. It was followed by Swiggy, the food ordering and delivery platform. Swiggy buyback was in the range of $7 Mn to $9 Mn. Last year also witnessed buyback from other popular companies like Meesho, Urban Company, First Cry, and Unacademy.
ESOPs are a win-win for both Employers and Employees.
ESOP is a mighty instrument, which gives employees a sense of ownership. It also becomes a tool of effective wealth creation for the employees. As the company grows, the value of share also grows. It helps boost the employee’s morale and makes the employee an active participant in the company’s growth. It makes the proposition of working with the company more attractive, as it gives opportunity to be part of the company’s history.
While it is widespread nowadays for employees to jump across the companies quite frequently, ESOPs are becoming an effective way to attract and retain the right talent for the company. It becomes a very rational way to attract talent when it is not possible to pay heavy salaries.