Startup Employees Sell ESOPs Worth Rs 7500 Crore In Last 6 Months; Zerodha #1 In Buying ESOPs From Employees

You found a company. You needed to attract talent. But did not have enough funds to pay them heavily. What do you do?

You offer part ownership of your company to them i.e. you offer them Employee Stock Ownership Plan (ESOP). Later at the growth stage of the company, you needed leaders at the top and middle management level, you also try to woo them through ESOPs. Such has been the culture brewing in most of the startups in the country. And it seems that the practice now has come of age.

The first half of 2021 was buzzing with ESOP buybacks worth $100 million

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 was leading the pack with a buyback of 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, among others.

ESOPs are win-win for both Employers and Employees

ESOP is a very powerful 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 morale of the employee and makes the employee an active participant in the growth of the company.  It makes the proposition of working with the company more attractive, as it gives opportunity to be part of the history of the company.

While it is very common 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.