Orange Health, CityMall & Niyo announce Buyback Programs while Q3 sees a sharp drop in Employee Liquidity

Welcome to the September edition of Fables of ESOP. While the slowdown in liquidity programs persists, companies continue to announce pool expansions or other equity incentives to attract and retain top talent.

Sharp drop in Employee Liquidity: $200+ million in Q3 2021 vs. <$20 million in Q3 2022

In terms of liquidity programs Q3 2022 saw a sharp drop in the liquidity volumes.

While Q3 2021 was a record quarter with very large companies such as Flipkart, Upgrad and Unacademy announcing large ESOP Buyback programs, 2022 see the volumes shrink by a factor of over 10!

In September, Orange Health and CityMall announce ESOP buybacks post their funding rounds.

Let’s do a quick round up for this month!

ESOP Liquidity Programs

Series B Funded Orange Health announces its maiden ESOP and Equity buyback worth USD $1M

Orange Health is a leading health-tech start-up building India’s fastest diagnostic lab service. They announced their maiden buyback program worth USD $1M impacting their current and former employees. It marked a significant milestone in its growth journey given that the buyback program was initiated within 2 years of its launch. This comes post the company’s Series B funding of $25 Mn by Bertelsmann India Investments, General Catalyst, Accel, Y Combinator, Good Capital and others.

25 existing and former employees are eligible to participate in this buyback program. With this buyback they aim to recognize contribution of their early employees.

CityMall conducts its first ESOP buyback worth $1.3Mn

CityMall, a social commerce platform, conducted its first ESOP buyback program of $1.3 Mn in which more than 50 employees across senior management and core team participated.

The company had raised $75 Mn earlier in March, post which it also went through a business model restructuring which resulted in the company cutting down its team strength. Angad Kikla positioned this ESOP liquidity program as a testament to company’s current position and growth prospects.

Since its inception the company has grown 30% MOM and now serves more than a million customers.

Niyo announces its second ESOP buyback plan

Niyo announced its second ESOP buyback plan for most of its employees with a vintage period of over two years and good performance ratings across the last few years. It had recently granted ESOPs worth ₹40 cr in April 2022 as a part of their annual appraisal.

ESOP Pool Expansion Announcements

Ninjacart adds stock worth $55Mn for its employees and founders

Ninjacart, a B2B agritech, expanded its current pool by 3366 options and has now been increased to 6522 options which is worth $43,5Mn. Apart from this they also have created a separate pool of 4,996 shares for their co-founders. Ninjacart is currently valued at $815Mn.

Digit Insurance expands its ESAR pool to $145 Mn

Digit Insurance recently announced an expansion of its ESAR pool by adding 57,02,272 ESARs and is now worth $145Mn. Digit Insurance does seek to list through an IPO in the future. However, recently SEBI had put it’s IPO application on hold.

Soothe Healthcare expands its ESOP pool to $1.1Mn

Soothe Healthcare is a homegrown personal hygiene company and has expanded its ESOP pool size by 700,000 options and now is worth $1.1 Mn.

Nandu’s announces its maiden ESOP scheme

Nandu’s, India’s largest hyperlocal and omnichannel meat retail brand announced its maiden ESOP plan covering employees at all levels. Bootstrapped since inception, Nandu’s structured an ESOP plan to reward employees for their contributions towards the company’s growth in these challenging times.

Narendra K Pasuparthy — Chief Farmer, CEO, and Founder, Nandu’s said,

“It has been our cherished dream to recognize and reward our employees through ESOP for their hard work and long-term commitment to Nandu’s. We already have several company policies in place to ensure a healthy and happy environment for our people. We hope that this will be yet another additional factor to motivate and retain employees as well as attract fresh talent into the company.”

Amidst this funding winter, we continue to see companies revamping their policies to make them more employee friendly in order to attract new talent.

ESOP Direct + Qapita: Our Shared Vision of Democratising Equity Compensation

Post our announcement of coming together with ESOP Direct to become the market leader in offering equity compensation (ESOP) solutions in India and SEA, we spoke with Harshu Ghate, MD & Co-Founder of ESOP Direct as well as Ravi Ravulaparthi, Co-Founder and CEO of Qapita over a fireside chat as part of our FablesOfESOP Podcast.

We discussed Harshu’s and Ravi’s journeys in building solutions to democratise Equity compensation (ESOPs) in India and SEA. We also touched upon the future plans as we seek to build this together.

I really enjoyed this candid chat and we covered several points:

👉 How was ESOP Direct conceptualised back in early 2000s?

👉 Evolution of ESOPs as a compensation tool over time and how has ESOP Direct played a positive role in the ecosystem with advocacy, knowledge and technology

👉 How is Qapita looking to build rails for the private markets and offer access, efficiency and liquidity to stakeholders.

👉 If salary has a payslip, why not Equity? #EquityPaySlip

👉 How are the two organisations are building on their synergies towards 𝑴𝒂𝒌𝒊𝒏𝒈 𝒆𝒗𝒆𝒓𝒚 𝑬𝒒𝒖𝒊𝒕𝒚 𝑶𝒘𝒏𝒆𝒓 𝑪𝒐𝒖𝒏𝒕.

Do watch the full video:

We couldn’t be more excited about building this together! 🚀

Do you want an Employee Friendly ESOP Plan?

Are you looking to set up an ESOP Plan or do you wish to review your current plan to make it friendly to employees in order to attract the best talent? We at Qapita can help you. Explore ESOP Advisory services.

Stay tuned to Fables Of ESOP.

Connect with me: srikanth@qapitacorp.com; LinkedIn; Twitter

www.qapita.com

Orange Health, CityMall & Niyo announce Buyback Programs while Q3 sees a sharp drop in Employee… was originally published in Fables of ESOP on Medium, where people are continuing the conversation by highlighting and responding to this story.

Welcome to the August edition of Fables Of ESOP. The slowdown seen in ESOP Liquidity programs since the last few months continued through August with only one liquidity program announced by SuperShare.

Meanwhile, a handful companies did announce ESOP pool expansions signalling the intent of granting more ESOPs as an instrument to retain their talent amidst the funding crunch and the push to conserve cashflows.

ESOP Announcements Round-Up

Let’s do a quick round-up of programs announced this month.

Series A Funded SuperShare announces its first ESOP Buyback

SuperShare, a series A stage startup, announced its first ESOP buyback this month.

They join the league of very few startups such as Grip Invest etc. that have announced an ESOP liquidity program so early in their growth journey.

Other than this early liquidity opportunity for SuperShare’s employees, this program also allowed for a large share of their vested options to be liquidiated, which is rather uncommon as seen in other programs which typically allows for about 25% of vested options to be surrendered. While in this case, employees are able to liquidate up to 50% of their vested shares.

This is a step towards strengthening employee confidence in ESOPs as a wealth creation tool. As Sagar Modi, the Cofounder and CEO, puts it,

“this is the best way to convey our gratitude to the team that has stayed with us through our seed journey.”

Their Cofounder and COO, Advaith Vishwanath also adds that their ESOP pool is best-in class in terms of vesting frequency and exercise periods as they are competing with world’s biggest tech companies when it comes to talent pool.

Supershare also raised $6.5 million in the first funding round from Lachy Groom, Accel India, and Lightspeed. The round also saw participation from content creators Tanmay Bhat, MythPat among others.

ESOP Pool Expansion Announcements

UpGrad tops up ESOP Pool to have the third largest ESOP pool amongst EdTechs: UpGrad, the edtech startup led by Ronnie Screwala and Mayank Kumar, expanded its ESOP pool by 13% to 2,525,810 options. They added 300,000 options and now it is worth $260Mn. Post this expansion, upGrad has the third largest ESOP pool in the edtech space after Byju’s and Unacademy.

Accel Funded ScripBox expands ESOP Pool: Wealthtech startup, Scripbox has increased its ESOP pool to 1,209,726 options and is now worth Rs. 265.4 Cr. It also recently acquired a Pune-based wealth management startup Wealth Managers to further expand its reach and customer base.

Waycool expands ESOP Pool by 20% worth INR 92CR: Waycool recently announced a $12 million venture debt raise from Trifecta Ventures. Along with this fundraise announcement which came just 2 months post their $40 million fundraise, Waycool also announced an expansion of their ESOP pool by 20% which is worth INR 92CR.

We believe, given the current funding situation and caution exercised by investors in writing large cheques, this trend of limited company led buybacks will continue while companies will aim to expand ESOP pools with an aim to retain their talent.

We are also seeing companies restructuring their ESOP policies to improve coverage and employee friendliness as they seek to attract the best talent.

Opportunity for Secondaries?

That being said, given the continued long term bullishness that investors unequivocally have reflected about the India growth story, we sense there would be an increased uptake in secondary opportunities for strategic investors, Family offices, HNIs among others as they seek to enter good quality companies opportunistically. Listen to this podcast with Skanda Jayaraman which decodes liquidity programs in growth startups.👇

Do you want an Employee Friendly ESOP Plan? Are you looking to setup an ESOP Plan or do you wish to review your current plan to make it friendly to employees in order to attract the best talent? We at Qapita can help you. Explore ESOP Advisory services.

Stay tuned to Fables Of ESOP.

Connect with me: srikanth@qapitacorp.com; LinkedIn; Twitter

www.qapita.com

August continues to see ESOP pools expand as Liquidity shrinks was originally published in Fables of ESOP on Medium, where people are continuing the conversation by highlighting and responding to this story.

Context

While 2021 saw record capital flows into Indian startups, thanks to the macro-economic and geo-political factors, we are now seeing investors and founders exercising caution as can be seen in the reduced funding numbers over the last quarter.

As profitability and unit economics are back onto the discussion table, these are also times for founders to fundamentally look at their growth plans and cost structures and explore optimal ways to finance their business plans.

First let’s understand the various funding choices that founders have to grow their businesses.

Equity Funding: While expensive, it’s the most flexible and long term capital founders get

Startups at an early stage do not have the luxury of sustaining through customer revenue (also commonly called internal cash accruals). Infact, many startups, as we know them, are even negative contribution margin in their quest to acquire customers faster. In this context, an equity investor becomes both — the funder of first and last resort! Equity capital can primarily used to hire the core team, build the product, capital expenditure and in some cases also spend on marketing and initial customer acquisition to demonstrate initial traction. Many a times, startups don’t have the luxury of other forms of capital and hence, are forced to spend equity capital to fund all kinds of expenses.

Founders must also realize that equity is the most expensive form of capital as founders are giving their valuable shareholding to an equity investor every-time they raise funds. Abusing this source is counterproductive for everyone in the long run as founders gradually lose skin-in-the-game and along with it, the incentive to grow the venture.

Thumb Rule:

Use equity capital for the highest leverage items — spends that give them maximum ROI for the longest period of time.

Hence product, leadership team, fixed assets etc. are direct candidates, while other recurring/operating costs should ideally be avoided over a period of time.

Debt Funding: Sport it only if you can wield it

Raising debt capital for an early stage startup is like chasing a mirage in the desert. Only a few lucky ones end up finding this metaphorical oasis. By nature of the instrument, most early stage startups don’t qualify for debt — lenders typically require a certain period of track-record as well as a particular threshold of balance sheet strength. Also, unlike equity, debt comes with a legal compulsion to payback the principal along with the accrued interest in the stipulated time, failing which, the startup is pushed into default and liquidation.

Thus, debt while desired, is a double edged sword — one should sport it only if one can wield it!

Hence, while it is a challenging source for an early stage startup, given the uncertainty of revenue, it can turn out to be a cost-effective source for certain turnover based business models with constant flow of money. Further startups should look for possibilities of soft-loans, credit enhancements, credit guarantee schemes (like CGTMSE or Mudra) and interest subvention possibilities to make this source attractive for early stages as well.

Also, some amount of debt also helps drive discipline in startups in terms of monitoring cashflows and making regular repayments as the cost of default is quite high. This invariably leads to incorporation of processes and systems to manage the start-up’s finances better and setting them up for scale.

Venture Debt: Of-late, there are specialized funders called Venture-Debt Funds who are willing to fund growth stage startups at a slightly earlier stage than the typical banks and other financial institutions. They evaluate companies similar to a VC fund and take a call on investing an appropriate sum based on several factors such as: amount of equity funding raised, annual revenue, growth rate, unit economics, predictability of cashflow etc. Several startups have leveraged venture debt to wade through the funding winter and get some bridge capital to extend their runways before they raise their next equity round. However note that founders need to part with periodic interest payment as well as some portion of small equity either as upfront equity or in the form of warrants which gives the lender an optionality to unlock value in case the company does well in the future.

Thumb Rule:

Raise debt only for items that have a predictable cashflow to repay it back along with interest.

Grants: Don’t plan for it. And if you get it, don’t squander it

Grants are a great way to fuel your initial journey. Grants as the word indicates is an equity-free, one-way grant of money, and in many cases — with no-strings-attached. Basically it’s free money, a windfall you never expected. While one can’t predict grants in a business plan, once you get it, you can definitely use it to take you to the next logical orbital.

I have commonly seen how grants have helped startups:

• Many founders were able to beat the opportunity-cost conundrum to kick-off their venture full-time
• Early stage ventures have built new product-lines and validate them through pilots and early adopters
• Growth stage ventures have built teams for strategic projects that you didn’t fund otherwise through your equity funds, or invest in team and partners to acquire new markets etc.

Whenever you get such grants, treat it as an investment into a set of many mini projects in your wish-list. Hence it is important that you create a business plan for each opportunity and select the most attractive one that directly or indirectly maximises your northstar metric.

Thumb Rule:

Forget the thumb, just grab it with both hands! :)

Handy Tip:

Most grant programs are selection based on applications. So keep those standard answers about your startup ready and get interns to continuously apply to these programs.

The tip here is to attempt every delivery, persevere and stay long enough. And you are sure to get your share of low full-tosses to capitalise.

Sources: Govt. schemes (BIRAC, DST, MEITY, State Govt Programs, Patent Reimbursements), CSR and Corporate Grants as part of accelerator and social impact programs, Awards and Competitions etc.

Revenue/Subscription Based Financing: Convert your future revenue to present cashflow!

Before we conclude, let’s explore another form of non-dilutive financing which can prove to be an optimal form of funding for growth stage startups, especially given the funding winter seen in equity based funds.

By definition, a revenue based financing (RBF) or Subscription based financing is ability to convert company’s future projected revenue into upfront funding.

Funders basically look at the booked revenue or recurring revenue (typically in SaaS) and get a certain percentage of the recurring revenue as upfront financing which needs to be repaid in instalments linked to the revenue of the company until a certain return amount or percentage is achieved for the investor.

The advantage of RBF is that it is a hybrid instrument. It is not equity on one side and it is also not purely debt on the other and it straddles beautifully in between. So you don’t need to dilute equity while you might not be forced to pay in case you are not making a revenue as the instalments are revenue linked. For this flexibility, startups need to typically shell out a larger return than debt, however it is not expensive as equity. This flexibility can be quite handy for companies looking to get some upfront cash to manage and grow their operations.

To discuss this and many other nuances of these instruments, we are organizing a webinar in partnership with Recur Club which is a very well known Subscription based Financing player in this space.

In this webinar, we have seasoned founders talk about how can startups look to optimise their capital stack by exploring stage appropriate capital sources including leverage equity, debt and revenue based funding sources. Join Ravi Ravulaparthi, Cofounder and CEO of Qapita and Sudhanshu Bhasin, CBO at Recur Club as they demystify the various capital choices available to founders in the current context.

Discussion Points:

• Current business environment and need for capital
• Choices available to founders to raise capital
• Key considerations for raising an equity round and what to expect?
• What are the alternative forms of financing startups can leverage?
• Expert tips for founders to optimise their capital structure
• Q&A

Register and RSVP here: https://lu.ma/EquityAndBeyond

Do hit me up: srikanth@qapitacorp.com

Connected with me: LinkedIn; Twitter

Equity and Beyond: How can founders brave the winter by building an optimal capital stack? was originally published in Seeking QapitaL on Medium, where people are continuing the conversation by highlighting and responding to this story.

Welcome to the July edition of Fables Of ESOP. While we hope you are enjoying the monsoons (we in Bangalore definitely are… a little too much!), in the world of ESOPs, liquidity seems to be drying up. The funding winter is finally playing catchup with ESOP liquidity pools as well as companies are looking to conserve cash on their books.

While cash has been hard to come by, companies are trying to attract and retain talent by expanding their ESOP pools as well as allocating ESOPs to their employees amidst this slowdown.

Btw did you catchup our conversation on Liquidity matters with Skanda Jayaraman, CEO of Qapita Market place. If not here is the link to the blog.

Let’s do our usual round up of ESOP related news from India and SEA:

ESOP Liquidity Programs

July witnessed 2 new ESOP Liquidity announcements: Synaptic and Biz2Credit.

Synaptic announces their first ESOP Buyback worth $1 million

An alternative data insights company, Synaptic, recently announced their first ESOP Buyback program worth $1 million for its current employees. The program invited eligible employees to sell 25% of their vested options. 14 of their 80 employees participated in the buyback including the two cofounders: Rohit Razdan and Anurag Abbott. The startup had recently raised $20Mn in a Series B round held in May.

Biz2Credit Announces ESOP Liquidity worth $12 million

Biz2Credit is an online marketplace for small business funding. It recently announced its ESOP liquidity program for its Indian employees worth $12.25Mn. This program will benefit more than 500 employees. This comes post the company’s Series B funding of $52 million led by WestBridge capital.

Other Updates

Jar announces a new ESOP Plan worth $13 million: The Gold Savings App, Jar, has introduced a new ESOP plan as it seeks to close its funding round led by Tiger Global. According to reports, the size of the ESOP pool will be worth a little more than $13Mn.

Unacademy: The Edtech has increased its ESOP pool to 286Mn options, which is a 20% increase. This event followed the layoff of 750+ employees including educators which was done to cut costs and survive the funding winter.

Zomato: The food delivery giant has allotted 4,65,51,600 equity shares from its ESOP pool at an exercise price of Rs.1 accounting for close to Rs. 4.66 Cr which is about a 98% discount from the latest stock lows.

Amagi: The Media SaaS startup too has increased its ESOP & SARs pool. This announcement was made after the ESOP buyback that took place in April this year.

Watch: Decoding Liquidity Programs in Private Markets by Skanda Jayaraman, CEO of Qapita Marketplace

We recently also caught up with Skanda who leads Qapita’s newly launched Marketplace which offers Liquidity solutions for employees (ESOPs) and stakeholders through structured programs as per company’s requirements.

In this podcast, Skanda and I discuss to dymystify some key questions about running liquidity programs:

👉 How these liquidity programs are executed?

👉What is a buyback program and what is bought back?

👉What is a secondary sale?

Watch it here👇

Stay tuned to Fables Of ESOP.

Connect with me: srikanth@qapitacorp.com; LinkedIn; Twitter

www.qapita.com

July sees ESOP liquidity dry up as companies announce pool expansions and fresh allocations was originally published in Fables of ESOP on Medium, where people are continuing the conversation by highlighting and responding to this story.

Welcome to this special edition of Fables Of ESOP. Through this newsletter, we have constantly updated you of all the ESOP happenings in India and SEA. In 2021 alone, over 40 companies announced ESOP Buyback to the tune of about $450 million.

However, have you ever wondered about these questions:

• How these liquidity programs are executed?
• What is a buyback program and what is bought back?
• What is a secondary sale?
• How are liquidity programs financed by companies?

In this edition we seek to deconstruct the basics of liquidity programs for you. For example:

Did you know that most of these ESOP Buyback programs conducted by startups were infact technically not a ‘buyback’?

To demystify this and many more aspects of Liquidity Programs, I spoke to Skanda Jayaraman, the CEO of Qapita Marketplace. Skanda is a seasoned Investment Banker in the startup world for over 2 decades with his last stint as the head of Spark Investment Banking which he grew into one of the leading Investment Banks in the startup space.

It was a free-wheeling discussion with Skanda as he helped deconstruct all aspects related to liquidity programs right from the technical aspects of executing a liquidity program to when should a founders consider offering liquidity and the latest trends he is seeing in the market. Let’s dive-in to the details.

Here is the link to the full video.

What is Stakeholder and ESOP Liquidity and why is it important?

First up, Skanda spoke about the importance of employee and stakeholder liquidity and why it is important especially for private companies. Skanda explained that earlier the only ways in which private companies offered liquidity to their employees and stakeholders was by going public or through an acquisition event.

However, startups are choosing to remaining private for a longer period of time currently and yet there is a demand from stakeholders to get liquidity for their ESOPs and shares. From companies standpoint, startups are competing for the same talent that is also joining the tech giants such as Microsoft, Google, Amazon etc. which offers anytime liquidity as these companies are liquidity. hence it is extremely important for founders, board and CFOs of companies to consider offering liquidity at regular intervals to attract and retain the best talent.

When should one consider offering Liquidity to employees and shareholders?

On this, Skanda opined there cannot be a one size fits all answer to the timing question. It depends on the stage of the company’s evolution and the sector the company operates in. In earlier days, IPO was the only route. However founders can now consider doing a liquidity program event at a Series B stage and beyond. Many companies that announced a large funding round recently have also considered offering a liquidity program. However companies need not wait for a funding round to offer liquidity anymore. They can offer structured and frequent liquidity events say every 6 months or 9 months thus offering liquidity opportunities across the lifecycle.

What are the different approaches to running a liquidity program and how are they financed?

Skanda spoke of three broad ways in which liquidity program can be executed and financed.

1. ESOP Surrender: The first is an ESOP Buyback, where the company uses the cash on its balance sheet to cancel the ESOPs that are surrendered by employees and pay out the value as an addition income to the employee just like a bonus. It is taxed as per normal income tax rates
2. Share Buyback: In this case, the employees and stakeholders having shares of the company can participate in the buyback event where in the company buys back the shares at the value decided and transfers cash to the employee. In this case, capital gains is applicable as per the standard rates. This method also involves company’s own cash reserves.
3. Secondary Sale: In this case, a third party buyer buys share from a shareholder and transfers the consideration to the stakeholder. Here, the company’s cash is not utilised and the transaction doesn’t hit the company’s books. In this case too, the selling stakeholder needs to pay capital gains on the value appreciation.

What’s the process of conducting a Liquidity Program?

Next up, we asked Skanda the process of conducting a liquidity program and he explained why it practically takes a few weeks to execute a liquidity event for a private company. By nature of the company remaining private, it means that the shares are not transferrable freely in the market and any transaction needs to be in compliance with the Company Laws, FEMA laws as applicable and in accordance with the board and investor rights such as ROFO/ROFR etc. And hence, closing these transactions manually step by step anywhere between 6 to 8 weeks. Qapita seeks to automate the entire workflow and helps companies complete liquidity programs in a matter of a few days.

What are the recent trends you are seeing with regard to ESOP Liquidity?

Skanda pointed out some very interesting points with regard to ESOPs in general and liquidity trends. He mentioned that there is a fundamental shift in the way employees are looking at their jobs these days. They are increasingly seeking more skin-in-the-game (SITG) and demanding a share of ownership in the companies they work for to feel more associated. Further, once ESOPs are given, they also demand liquidity at regular intervals. All these trends in a way validates the need for structured liquidity programs.

What is the investor mood from the supply side?

Here Skanda highlighted that there are two aspects one needs to look at: the structural elements of India and SEA as large market opportunities as well as the cyclical factors that are impacting the short term sentiment. He mentioned that the cyclical factors causing the current downturn might prevail for the next couple of quarters, however the structural strength of India and SEA as strong market opportunities is well established as validated by huge pool of fresh capital raised by most of the global venture capital funds dedicated for India.

How does Qapita Marketplace seek to transform private markets?

Lastly we asked Skanda about what’s brewing within Qapita Marketplace and how do they seek to streamline liquidity in private markets. He used a nice analogy that Qapita is seeking to build for this broken private market infrastructure and smoothen the deal process and timeline for liquidity programs to make it easy for various categories of investors to participate in private markets and invest in secondary and buyback opportunities in startups. Further, Qapita also seeks to offer custodial services to help companies consolidate their shareholders on captable. Qapita also offers Structured Liquidity Programs for startups to offer liquidity at regular intervals.

So that was a comprehensive discussion with Skanda on all things liquidity as far as private markets are concerned. We hope you found the discussion informative and you were able to get your open questions answered.

If you are looking to plan a liquidity program in your company or if you have any further questions on how liquidity programs work, do reach out to us using the coordinates below.

You can email to: info@qapitacorp.com or srikanth@qapita.com

Connected with me: LinkedIn; Twitter.

Stay tuned to Fables Of ESOP.

Decoding Liquidity Programs for Private Markets with Skanda Jayaraman, CEO of Qapita Marketplace was originally published in Fables of ESOP on Medium, where people are continuing the conversation by highlighting and responding to this story.

June continued to see a dip in the number of companies offering ESOP Liquidity programs as the focus of the startups has been to re-strategise and extend runways as they seek to wade through the funding winter. This has also led to layoffs in several dozen startups impacting 10,000+ jobs. Given the need to conserve cash, companies preferred to conserve their primary funding pool. A few startups have also opted for the secondary sale route to offer liquidity to its core team, founders and employees.

ESOP Liquidity Roundup

June saw ESOP Liquidity announcements by 3 companies: Swiggy, Money View and Headout.

Swiggy repeats its order. Offers liquidity worth $23 million to employees

The online food delivery decacorn, Swiggy, announced its ESOP liquidity program up to $23Mn. Swiggy was one of the first startups to announce a ‘Structured Liquidity Program’ stating the intent to execute employee liquidity programs every year.

Further, the company also announced its “Build Your Own Dollar (BYOD)” program which offers ESOPs to all permanent employees of Swiggy which were only offered to employees above a certain grade and/or based on performance.

Money View redirects profits to Employee Buyback

Money View, a Bengaluru-based fintech, has witnessed booming profits over the past 18 months and therefore has recently decided to reward its employees through a buyback program. All employees who have completed one year with the company are eligible and can sell up to 20% of their vested shares. The company also plans to announce another buyback next year in June 2023,

Headout announces an ESOP Buyback program benefitting all employees

Headout, a travel experiences app, which raised $42 Mn in February 2022 in a Series B round led by Glade Brook Capital, announced its first ESOP buyback program this June for all its current and former, about 104 employees.

Other Updates

ESOP Pool Expansions to attract talent despite Funding Winter

Several companies in June have announced to expand their ESOP pools to attract and retain talent as startups look to conserve cash and offer long term rewards through ESOPs. These include:

• Healthians expanded their ESOP pool recently to $8 million
• Social Commerce Unicorn DealShare announced an ESOP Pool top up to make it worth $60 million
• NoBroker too added additional units to its ESOP Pool which now stands at $48 million.

MPL amends their ESOPs to make it employee friendly

MPL who recently announced a 10% reduction of their employees, has also announced changes to their compensation structure and ESOP plans. With regard to ESOPs, MPL has made it more employee friendly aligning to prevailing standards. Key changes include:

• Monthly vesting post 12 month cliff period.
• Post Separation Exercise Period has been extended from 30 days to 10 years (this will enable employees to carry forward vested options after quitting thus avoiding upfront taxes)
• Also the amendments include immediate vesting of options in case of separation involving demise or disability.

To sum-up, notwithstanding the funding winter and lay-offs by a few startups, the larger value-creation opportunity for startups is still out there and it is the best teams with solid execution capability that will come out as victors. ESOPs offer a credible instrument for founders to attract the best team while optimising for cashflow in these situations.

Also given the tightening of primary fund flow, as founders and CFOs, one can consider secondary opportunities to provide liqudity to your stakeholders. If you are a founder looking to offer liquidity to your employees and shareholders, reachout to Qapita Marketplace. We offer bespoke and structured liquidity solutions to companies.

Are you a founder looking to setup your first ESOP Plan: Here are a few practical pointers to help you.

Are you an employee considering joining a startup: Here is a checklist of ESOP related questions you must ask.

Stay tuned to Fables Of ESOP.

Connect with me: srikanth@qapitacorp.com; LinkedIn; Twitter

www.qapita.com

Swiggy re-orders Buyback, pioneers ‘BYOD’ as June sees Liquidity dip was originally published in Fables of ESOP on Medium, where people are continuing the conversation by highlighting and responding to this story.

Much like the thunderstorms, May saw a couple of large ESOP liquidity events announced by RazorPay and Tekion. Many startups also expanded their ESOP pools to create enough headroom to attract future talent. The highlight of May was also Deepinder Goyal’s announcement of donating his recently vested ESOPs worth $90 million to Zomato Future Foundation.

Let’s Dive in!

Zomato Pioneers ‘ESOPs for Good’ with a $90 million donation from the Founder

After Unacademy’s T-SOP program to benefit their teacher partners and Urban Company’s P-SOPs to benefit their delivery partners, Zomato’s Deepinder Goyal has recently decided to donate his recently vested ESOPs worth $90 million to Zomato Future Foundation. The Foundation is a non-profit to benefit the children of Delivery Partners by sponsoring their education. This is indeed a noble initiative and might trigger other founders too to follow suit and pay-it-forward. We hope ‘ESOPs for Good’ becomes a trend and finances high leverage and impactful initiatives like this.

Also, on a lighter note, with the added blessings of tens of thousands of delivery partners, we hope that Zomato stock price reverses its negative momentum. :)

ESOP Liquidity Roundup

After this heartwarming news, let’s do a quick roundup for Buyback news:

Razorpay announces its biggest ESOP buyback worth $75Mn

Known for announcing regular liquidity programs, Razorpay announced its fourth and the largest ESOP buyback program worth $75 Mn, with around 650 former and current employees participating. Unlike most liquidity events, this campaign was structured as a secondary sale transaction. Lightspeed Venture Partners and Moore Strategic Partners will be financing this secondary transaction and thereafter join the company’s captable.

Tekion creates 250 Crorepatis with $40 million Buyback Program

Automative startup Tekion announced a massive INR 300 CR ESOP Buyback program benefiting about 400 Tekion employees with over 250 becoming crorepatis. As part of the program, employees had an option to sell 25% of their vested options at the same price as offered to founders and investors. Tekion announced a massive $250 million round at $3.5 billion valuation last year

Other than RazorPay and Tekion, travel and expense management SaaS platform — ITILITE also announced an undisclosed ESOP Buyback program in May.

ESOP Pool Expansions

Apart from the buyback events, a bunch of startups also expanded their ESOP pool in May

Oxyzo creates an ESOP pool worth $49Mn: After raising the country’s biggest Series A round of $200Mn, Oxyzo is a new member of the Unicorn Club. Oxyzo is now creating an ESOP pool worth almost $49 Mn for its employees in and outside India.

Ather Energy increases its ESOP pool to $29.6Mn: Ather Energy, the scooter manufacturer, has increased its ESOP pool size to currently being worth $29.6Mn. This change was announced shortly after the company achieved its highest-ever monthly sales. The board also mentioned that it has plans to go public soon.

Ninjacart expands its ESOP pool to $22 million: This news came after its buyback announced earlier in Jan.

A Few Observations in Conclusion

As we conclude this month’s edition, here are a few observations with regard to how ESOP liquidity will pan out for the remainder of the year:

• The Graduation from Primary to Secondary Liquidity: As funding sizes of Series B+ rounds get tighter, there might be a graduation from primary led liquidity to secondary sale programs as boards will prefer to conserve cash and extend runways instead of provisioning liquidity programs. Hence expect a lot of activity in the secondaries market.
• The Shift from Quantity to Quality: Perhaps the 2021 pattern of ‘Get an ESOP Buyback Program Free with every Series B+ round’ will get rationalized. Companies that have robust business models and monetization roadmaps might be able to attract investor interest to finance ESOP buybacks
• From Stock Picking to Job Picking: Growth operators in startups will have to pick the right rocketships to create value for themselves.
• New Funding Sources: With the emergence of startups as a mainstream asset class, most family offices, HNIs and wealth outfits will seek to invest in startups through these secondary opportunities.
• This Too Shall Pass: Fundamentally nothing has changed! The massive problems are out there to be solved and India as an ecosystem is well poised to serve the global scale needs. CleanTech and Web3 are new orbital shifting opportunities that are emerging. No better time to be long on Indian startups! :)

If you are a founder looking to offer liquidity to your employees and shareholders, reachout to Qapita Marketplace. We offer bespoke and structured liquidity solutions to companies.

Stay tuned to Fables Of ESOP.

Connect with me: srikanth@qapitacorp.com; LinkedIn; Twitter

Razorpay & Tekion offer $100m+ liquidity to 1000+ employees; Zomato pioneers ‘ESOPs for Good’ was originally published in Fables of ESOP on Medium, where people are continuing the conversation by highlighting and responding to this story.

April sees ESOP Liquidity pools drying out, while founders and top executives benefit from Share Buyback Programs

April was a peculiar month from an ESOP Liquidity standpoint. While the coffers seemed to have dried up from providing liquidity to large set of startup employees, the month did witness a handful share-buyback deals to benefit the promoters and top executives.

What’s the difference you ask? Well in the former, company deploys a budget to execute a structured liquidity program to enable employees surrender a percentage of their vested options in return for cash as per the buyback price. In the latter, a limited set of individuals are offered an opportunity to surrender/sell their shares to the company or a third party.

Let’s do a quick round-up of liquidity programs announced.

PineLabs executes a share buyback worth $6 million post their ESOP buyback last month

PineLabs which was in the news for announcing a $13.5 million ESOP buyback last month has also announced a share buyback program worth $6 million for its top-level executives including the CEO. This comes after a $50 million fundraise from Vitruvian Partners, a London-based international investment firm, at a valuation of $5 billion. The company has also increased its ESOP pool to 1.44 million options worth $ 680.23 million after adding 70,000 more options.

Whether this $6 million is part of the earlier $13.5 million or in addition to it is not completely known. The executives who participated in the buyback are: Amrish Rau, Kumar Sudarsan (QwikCilver), Kush Mehra (CBO), Dev Anand Sharma (VP) and Rakesh Sharma (SVP).

Classplus conducts share buyback program worth $3.15 million

Edtech startup Classplus executed its maiden equity share buyback plan worth Rs 24 crore which was participated by the company’s founders, a set of early angels and employees. This represents 4.86% of the paid up equity share capital of ClassPlus. The Tiger Global-backed company had recently announced its new round of $70 million at over $600 million valuation

Livspace executes share buyback worth $9.5 million

Home interior platform Livspace [implemented a share buyback program](https://entrackr.com/2022/04/exclusive-livspace-executes-share-buyback-worth-9-5-mn/#:~:text=Livspace has passed a special,regulatory filings in Singapore shows.) from its top-level executives which represents 6.06% of the total equity shares of the company. Livspace had turned a unicorn following a $180 million series F round led by KKR & Co at a valuation of $1.2 billion in February 2022

Upstox to buy back shares worth $4 million from Founders and employees

Investment platform Upstox announces a share buyback program worth Rs 29 crore from its founders and employees including Ravi Kumar, Shrinivas Vishwanath, Kavitha Subramanian. Upstox had raised $25 million from existing investor Tiger Global at a valuation of $3.3 billion in November 2021.

In other news:

• Unacademy expands ESOP pool from 99k options to 238 million options
• Air India under the new Tata Group management is likely to announce an inclusive ESOP scheme for all employees across designations. Good to see the intent of benefiting all employees and also aligning objectives to build a profitable enterprise under the new management.

To sum-up, after a record year of ESOP Liquidity in 2021, we are witnessing an interesting pause in both the volume and quantum of liquidity programs.

Whether this is an isolated aberration or a harbinger of an imminent dry season, time alone will tell.

While we definitely hope for good monsoons,

We at Qapita are building solutions to provide liquidity for all seasons!

If you are a startup and wish to offer liquidity to your employees and shareholders do reach out to us and we can help you execute a customized innovative program to meet your structuring requirements and employee objectives deploying our tech-enabled marketplace solutions.

Connect with me: srikanth@qapitacorp.com; LinkedIn; Twitter

April sees ESOP Liquidity pools drying out, while founders and top executives benefit from Share… was originally published in Fables of ESOP on Medium, where people are continuing the conversation by highlighting and responding to this story.

Thanks to the upward momentum built up over last few months, despite having 6 ESOP liquidity announcements amongst India based companies, March felt like that small speed breaker with the quantum of ESOP Buybacks dipping to about $22 million. We also had one ESOP buyback announced by Funding Societies worth $16 million.

Whether this is the usual slowing-down before one switches gears or a larger harbinger of a slowdown, well, time alone will tell. So keep watching out for more in this space.

March ESOP Buyback Roundup: $38 million worth ESOP Liquidation by 7 companies in India and SEA

NoBroker, Jupiter, CoinSwitch Kuber, Kristal AI, Fleetx, Rebel Foods and Funding Societies have announced their ESOP liquidity programs in March 2022. Let’s do a quick roundup.

Real Estate rental unicorn ‘NoBroker’ announces ESOP Buyback Plan worth $4.2 million

Tech-based brokerage free real estate start-up NoBroker announced INR 32.2 Crore worth ESOP buyback program for its former and current employees. Company provided the liquidation opportunity to about 95 former and current staff which constitutes about 57% of total employees who currently have ESOPs. This comes after they turned unicorn by raising $210 million as part of their series E funding round led by General Atlantic, Tiger Global Management and Moore Strategic Ventures.

Jupiter announces ESOP buyback worth $4 million

Neo banking platform Jupiter completed its ESOP buyback program worth INR 30 crore which was availed by around 21 of their former and existing employees. The event comes two months after the company announced closure of its $86 million series C funding round from Tiger Global, Sequoia Capital and others.

Kristal.AI unveils its maiden ESOP buyback worth $1 million

Asset management platform Kristal.AI rolled out its first ESOP buyback of INR 7.6 crores for its former and existing employees. In January 2020, Kristal.ai had raised INR 45.6 crores ($6 million) in its series A round led by Chiratae Ventures and Desai Family Office. Since then, the platform quadrupled its AUM and its user base has expanded seven-fold, resulting in 22 times increase in its annual recurring revenue.

Fleetx.io announces ESOP buyback worth $507K

SaaS based fleet management platform Fleetx.io has announced their ESOP buyback program worth approximately INR 3.9 crores to 45 of their current and ex-employees following the closure of their Series B funding round led by IndiaMart.

Fleetx offers a suite of IoT and software-based products to help industries digitise their logistics operations and help them improve safety, efficient and sustainability of their vehicles and operations.

CoinSwitch Kuber completes ESOP buyback worth $2.5 million

Crypto unicorn completed its first ever ESOP buyback worth around INR 19 crores. The buyback is funded through a mix of internal and external resources. The company joined the unicorn club in September, 2021 after closing a $260 million round from American venture capital firms Coinbase Ventures and Andreessen Horowitz.

Rebel Foods announces ESOP liquidation worth $10 million

Cloud Kitchen Unicorn Rebel Foods announced ESOP liquidation worth INR 76 crores. Around 150 current and former employees were eligible to liquidate their vested stock options. The company attained unicorn status with its Series F round of $175 million at $1.4 billion valuation led by Qatar Investment Authority in October 2021.

Funding Societies announces its fourth ESOP Buyback worth $16 million

SEA’s SME Digital Financing platform Funding Societies announced an ESOP Buyback plan worth $16 million for its current and former employees. This is their fourth ESOP buyback program.

Some unique element’s of Funding Societies’ ESOP Program:

• Company allows new joinees to take upto 50% of total annual salary in ESOPs — giving this optionality is incredible by any standard!
• Company also rewards loyal employees and re-grants ESOPs on their 2 year anniversary
• This buyback comes at the previous fundraising share price (Series C+) and at no discount
• About 120 current and past employees benefited from this buyback.
• Employees can also choose to keep their vested ESOP as options or exercise them to shares to become shareholders.

These are great initiatives by Funding Societies to encourage and retain their talent. No wonder the company is seeing its lowest attrition rate and highest employee happiness score right now since its inception.

Other News: Urban Company announces PSOPs scheme for Partners worth INR 150CR

Including their extended partners and gig workers as part of long term incentives seem to be a strategy taking ground in multiple companies. After Unacademy’s T-SOPs for their teacher partners last year, Urban Company has carved out a special incentive pool worth INR 150CR for their partner gig workers called PSOP: Partner Stock Ownership Plan.

The company plans to award stocks to thousands of its partners over the next 5–7 years. The initial tranche of INR 75CR has already been approved by the board to be awarded over the next 3–4 years. As the company states in its press release, the PSOP scheme will enable their service partners become shareholders at Urban Company enabling a broad-based wealth creation.

This is definitely a positive initiative and in some sense trend-setting as other gig platforms too would be pushed to incentivise their extended partners. This pool size perhaps represents about 0.66% of their overall equity (assuming $3 billion valuation) which perhaps is not a lot compared to the average ESOP pool sizes seen in the company. Notwithstanding this fact, it is definitely a great initiative as it gives an opportunity for gig workers to participate in value multiplication over a period of time. And as this concept sees acceptance, companies might engage in constant top-ups to the pool just like in ESOPs.

Through initiatives like these, hopefully many more Fables Of ESOPs would be crafted..

Stay tuned to Fables Of ESOP 🙂

Connect with me: srikanth@qapitacorp.com; LinkedIn; Twitter

March 2022 Roundup: 7 companies announce ESOP Liquidity; Urban Company offer PSOPs to its Partners was originally published in Fables of ESOP on Medium, where people are continuing the conversation by highlighting and responding to this story.

The Story of GRIP: How to build a compelling product in a People-First startup and get funded by your users

In this edition of Fables Of ESOP, we speak with the team from GRIP — Vivek Gulati, Co-founder and COO; Nimisha Dua VP-HR at GRIP. I really enjoyed this free-wheeling conversation where they talk about GRIP’s genesis and hyper-growth journey, their user’s trust in the product and their ability to raise money from them, GRIP’s people philosophy and ESOP policies.

Towards the end, they also shared a few words of wisdom for their fellow operators from the startup ecosystem. Do read and listen in. The full video is here:

Coming to GRIPs with the Idea!

Vivek Gulati met his co-founders Nikhil Aggarwal and Aashish Jindal while they worked for the same company at a point of time. All the salaried employees, soon to be co-founders, saw capital coming into bank account but struggled with finding avenues to invest. They realised that Retail investors, who do not have an HNI status have very few options to invest in, like, the not very high yielding but secure FDs & RDs or highly volatile mutual funds & equity market. While the HNI investors enjoyed multiple sources of capital generation and investments, there was a need of an alternative investment class, which can cater to the retailers’ demand and that’s how GRIP came into existence.

On the other side of the equation, start-ups are in constant need of capital, especially to fund their assets, and when capital is invested in assets, the capital is parked with a physical, visible instrument which is less risky and less volatile than the equity market but little higher yielding than the FDs. It is this middle layer of investment and returns that Grip targets. Other than the existing products like Lease financing and Inventory financing, GRIP is getting into multiple alternative asset classes with the goal to reach out to as many retails investors as they can and help them build wealth via diversifying their wealth into alternative investments. And at the same time give valuable cash flows to Start-ups and organizations on those assets.

You must have heard of ESPP — Ever heard of USPP?

When I joked that GRIP has pioneered a new phenomenon — USPP, i.e. User Stock Purchase Program, Vivek explains the reason behind GRIP’s decision to raise capital from their own users.

GRIP witnessed an exceptional growth in the last 18–20 months, for a company that was born during the pandemic. While on one end their users have been continuously growing, on the other end GRIP is able to approach more companies to deploy their assets. Grip stands at 193 Crores in total disbursement as of February 2022 and is positive to cross 200 crores soon — a journey, that GRIP believes would not have been possible without the users putting in trust with GRIP. More than 15% of GRIP’s users are repeating their investments on a monthly basis since a long time, and GRIP believes such trust needs to be rewarded and be made part of the company’s journey. GRIP raised about $1 million from their users, and now few of GRIP’s users are stakeholders in the company.

Nimisha adds that the users themselves initiated such an idea, they were so happy using the product that they volunteered to invest and become part of the company.

Now isn’t this product-market fit at a different level, where your market is also demanding a skin-in-the-game because they so truly believe in the product. Kudos to team GRIP 

Building a GRIPPING experience for their people: People First Approach & Rewarding them Generously

Nimisha explains how GRIP has been prioritizing their employees with their People First culture. Unlike most organisation who start with product, then profit and then people, GRIP has a philosophy of people first. GRIP believes that when people are happy and engaged, they will put in efforts to build great products. Nimisha says, in today’s age, where information is so freely available, where everybody can copy the technology and business model, the true source of competitive edge are the people. If a company has the right people onboard, if they are culturally aligned, they are happy with what they are doing, they are engaged, then they can truly build a great organization.

Grip’s product focuses on building wealth for their investors and users, Grip uses the same ideology internally with their employees as well. GRIP wants their employees to grow with the organisation, not just career wise but also become wealthy and that’s how GRIP has designed their ESOP program. They have a generous-employee-friendly ESOP allocation set aside for the employees with very long exercise period at a very small exercise price.

On a side note, once the employees cash out, where will they park their money? Perhaps they’ll come back to GRIP? 

Explaining GRIPs ESOP Policy

Nimisha speaks about GRIPs inclusive, fair and transparent ESOP policy. Unlike some organisations who would allocate ESOPs to only a certain level of employees, probably the senior leadership or the middle management, GRIP as a policy gives out ESOPs to all of their employees, irrespective of level grade or job type function which is a fixed percentage of their CTC.

Nimisha also talks about the relevance of giving its employees visibility to their ESOP’s potential wealth creating possibility. GRIP uses QAPITA’s platform to make Employees see the wealth accrual happening and how the value of their ESOP changes when the company raises more funds and grows. The employees are partners in GRIPs growth, in the true sense.

GRIP’s First ESOP Buyback Program within 24 months of Inception

When asked about the buyback program that was executed in record time, Vivek explains that the general perception about ESOP is that it’s a tool which helps build long term wealth. However this wealth remains just on paper. They don’t see the real money.

For GRIP, it is important to give employees the opportunity to make them long term wealth but its even more important to give them the visibility that its not just on paper, but something real that they can realize regularly from such programs.

Vivek rhetorically asks, when the company are growing at such a fast pace and is raising capital for themselves, why not the employees? Why don’t the companies think about making frequent ESOP liquidity programs for them? Vivek says, ESOPs shouldn’t be a time bound thing that the employees can reap the benefits of only when the company goes for an IPO.

Vivek gives example of Udaan’s recent announcement on Zero cliff period for ESOPs and hopes that more and more companies take such steps to make ESOPs more employee friendly. It helps in the evolution of the whole eco-system; the employees feel more connect to the company because they will be able see growth of their monetary benefits in bank as the company grows.

Nimisha points out how buyback programs early on adds to giving employees a sense of freedom that in case they want to encash their ESOPs now or if they want to wait it out, both options are always there for them to avail.

Talking about the execution of the buyback program, Nimisha reveals with a smile that, though the employees were excited and appreciated GRIP’s intention to announce an early buyback program, the uptake wasn’t that much. The employees not exercising the buyback program too much was encouraging for GRIP as it shows the employees’ trust in GRIP, its product and its potential to grow.

Employees not exercising the ESOP liquidity opportunity and waiting it out, is lately seen to be a usual phenomenon in companies who have announced buyback programs, which shows how the ecosystem has matured over the years.

Pearls of wisdom

One of the things Vivek is especially proud of that GRIP did is, distributing ESOPs to each and every employ in the company. ESOPs are a very meaningful tool that can change employees to stakeholders and drive ownership. It’s a known fact that, its easy to manage stakeholders and rather difficult to manage employees. So, convert all of your employees into stakeholders.

Use platforms and technology like QAPITA to drive ESOP management to give visibility to employees and build more transparency regarding their ESOPs. Vivek recalls with a smile, how absolutely no one missed the ESOP seminar conducted by QAPITA while there are always at least 1–2 employees missing generally in other company meetings. This shows that people are interested in programs like ESOPs and even more interested when you give them more visibility towards it.

Vivek admits that It’s difficult to make a people first organisation, to choose your team members before your profit and your product because there is pressure from investors and various others. But in the long run, it is definitely worth it. People define the journey of the company and they decide the goal the company will achieve in future.

Further Nimisha reiterates that, ESOPs are a great tool to create a sense of belonging in people who work for you. And as organizations, we should absolutely utilize them to the maximum. And when working around ESOPs and allocating them, companies should make sure that it’s an absolutely transparent process. Nimisha further adds that, transparency in something like this is of immense importance as it goes on to reflect the organization’s intentions and authenticity. And using technology to carry this out is a great idea for this as it takes out that human intervention and brings transparency for everybody.

The only living dynamic thing in an organization are people. Nimisha presses further on this fact that; People will be the competitive edge that will take an organization to the next level. Whatever people policies or whatever ideologies around people function a company has; they need to make sure that everything is implemented with the right intention and the impact is felt in the last user. There shouldn’t just be any section of people enjoying certain benefits and another section in the organization (or the lower grade employees) not feeling the impact. Everybody is going to help you in your growth journey.

Vivek clarifies that Grip does not look at this early buyback program as a one-off event. Grip is committed to making ESOP liquidity programs as frequent as possible.

That was a fascinating chat and I am so happy to see that GRIP has come up with such friendly practices in-line to their ‘people first’ philosophy. Here’s wishing them best and a gripping success!

And yes, if you wish to craft Fables of ESOP at your organization, do give us a shout. We at Qapita can help you. :)

Connect with me: srikanth@qapitacorp.com; LinkedIn; Twitter

The Story of GRIP: How to build a compelling product in a People-First startup and get funded by… was originally published in Fables of ESOP on Medium, where people are continuing the conversation by highlighting and responding to this story.