How to set up your ESOPs pool?

Takeaways from the ESOPs roundtable:

Timestamps:

0:00 - Intro

2:30 - When is the right time to build your ESOP pool?

The best time is to do it right before your first round of funding assuming that you'll raise funds in the first one or two years. In general, the earlier you do it, the simpler it gets in the long term.

7:00 - Balance is key

Using ESOPs as an incentive is a balance between giving enough vested as well as unvested equity to your early employees. Top-ups and refreshers are a good saying of executing this with ESOPs.

10:14 - Enabling secondary liquidity essentially happens in two scenarios:

(a) Investors want to buy a larger stake in the company than the founder's willing to part with

(b) The startup has more capital and they want to increase their ESOP pool.

14:45 - When to exercise your ESOPs?

If you believe in a positive future for the startup whose ESOPs you own, and have the risk appetite, exercising the conversion into shares earlier is an economically wise decision, provided you have the liquidity available to bear the taxes.

19:50 - Setting up the ESOP pool:

a) Deciding how deep do you want to go while distributing ESOPs, few employees having a sizeable share or broad base ownership?

b) Finalising a few specifics like vesting schedules, frequency of vesting and the exercise price

c) Mandatory documentation and clearance from the RoC of India.

26:02 - A little bit about Zenequity

Transparency is the core feature of ESOP pools, and tools like Zenequity helps a lot to make these processes easy and clear while taking the headache away from you as the founder.

35:06 - Information is power

When it comes to ESOP policies, ignorance is certainly not bliss. Lack of information causes unnecessary problems is for both the employees as well as founders. Over-communicate, and be upfront from day one.