How does startup attract the best talent? Yes, most often ? after all is said and done [salary comparison, location, job spec etc] ? Employee Stock Option Plan (ESOP) ? may be the carrot to attract qualified candidates to their leave a cushy job.
Here?s what some of the global technology titans created for their employees ?
- 10,000 Microsoft millionaires created by the year 2000 [Richard S. Conway Jr., a Seattle economist]
- 850 Facebook employees became millionaires after the IPO [Source: ITWorld]
- 1,000 millionaires (approximately) that Google’s IPO created [Source: ITWorld]
In India ?
Mint had an article last week on ? Stock Options ? and its adoption by Indian companies to attract and retain talent. Just few data points from the article [Source: Mint, Stock Options Back in Vogue]:
- Just Dial: Stock options are offered to only 10% of the employees. 50 of its 6,000 employees benefited from the ?up round?.
- One97 Communications ? Expects to create more than 10 crorepatis through its ESOP plan.
- Flipkart ? 50 employees with stock options valued more than Rs. 1 cr.
- InMobi ? 25 to 30 employees ?very wealth? on paper
It seems like companies are headed in the right direction with their ? share the wealth ? attitude. However, it is important for employees to examine and do their due diligence before taking the ESOP plunge since the upside is ? only for the winners. Below are few basic questions companies/employees need to evaluate before participating on any kind of stock option plan.
- Basic Understanding ? What is an ESOP?
- Read the fine prints ? Vesting, Lock-in, Dilution, Transferability, Expiration?
- Are you getting in the right bus? Belief in the company/management team, investors etc.
- Promised vs. Signed ? It must be signed at the time of employment and NOT promised at a later date [Source: University of Hard Knocks]
- If you fail to plan, you plan to fail ? What to offer, whom to offer?
- Company structure, choosing the right ESOP Plan
- What percent is your option pool, pricing stock option?
- Accounting and legal implications?
What has been your experience as an employee/company?