Introduction to Employee Share Options

Basics

<aside> 💡 ESOP = Employee Share Option Plan, which is a way to give equity in your company to an employee.

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How does an ESOP work?

Stage 1

• Employee receives and agree to the ESOP terms and then receives options

Stage 2

• Vesting Period which is the employee has to comply to the ESOP rules.

Stage 3

• Options can be exercised to become shares.

<aside> 💡 Investors usually require ESOPS to be implemented before injecting cash as they do not want their shares to be diluted and it is amazing for retaining talent

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Terminology

Option Pools

<aside> 💡 Option Pool = options that can be allocated to employees (standard is 10% or 5%-30%)

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