Employee Share Option Vesting Simulator


What is and ESOP?

An ESOP is a type of employee benefit plan which is intended to encourage employees to acquire stocks or ownership in the company. Its is a tool for the company to attract and retain strong talent by offering ownership and financial benefits to their employees.

It is common to have around 15% of a VC-backed startup's equity set aside for the employees' stock ownership plan (aka ESOP, Option Pool, etc.). This figure generally ranges from 10-20% depending on the company; major factors that determine the size include:

  1. founders: number of founders, relative ownership stakes, and experience/reputation

  2. investors: current and future investors and their ownership stakes,

  3. senior executives: C-level hires (planned or current), advisors, and other grantees of equity, and

  4. business: stage, health, industry, and prospects of the business.

Some important factors to consider that are often overlooked:

  1. dilution: when additional equity is issued by the company (due to a financing, restructuring, or recapitalization), all existing shareholders are typical diluted pro-rata. If a seed-stage company has set aside 15% ESOP, that option pool will represent a smaller portion of the company upon a Series A event, whereby incoming investors often require a "top up" of the option pool (The Option Pool Shuffle),

  2. employees' perception: astute employees will do their research and will keep in mind factors such as dilution, preferred vs. common stock, transfer restrictions, and vesting schedule.

  3. advisors and senior hires: while the company may begin tapering off how much equity is granted to employees, as the startup matures, it might need to make expensive hires in the form of executives or esteemed advisors. If joining in a full-time capacity, they typically require higher equity packages, which eats into the ESOP faster.

    This is a simple visual simulator for companies that have an ESOP or shares allocated to key positions in the early years of a business. 


What can this simulator help you with?

It allows you to:

  • Allocate shares to specific key roles 

  • Calculate how many shares have vested to each employee at a particular date


Text included in the tables are just placeholders for "input". To get started just replace any green "input" text with your text of choice. 

ESOP.JPG

Notes to user

For complex vesting schedules it is advisable to work with a qualified Finance and Legal professional.
Some signs that you are dealing with complex scenarios or need professional advise:

  • First time applying ESOP or a share incentive scheme.

  • Multiple equity vesting Scenarios and cliffs for each employee.

  • Other conditions besides the passage of time for vesting.

  • Terminations 

Feel free to send any feedback or questions to letstalk@thesclablecfo.com