Our latest installment in the Pre-IPO Guide to ESOPs delves into one of the most challenging questions in equity compensation: how much to grant?
In today’s dynamic and fast-evolving startup ecosystem, traditional benchmarks for ESOP allocations are no longer the definitive guide they once were. The diversity in equity strategies across companies makes direct comparisons increasingly difficult. Adding to this complexity are a few trailblazing companies with large equity allocations that have gained attention. While these strategies may work for their unique contexts, they often leave founders questioning whether they should follow suit?
In this ever-changing landscape, how should companies planning an IPO determine the size of their grants? Below are the key considerations to help you navigate this critical decision:
| Getting the Mathematics Right |
- Ensure grants are reasonable by assessing impact on:
Iterative calculations may be required to strike the right balance across all stakeholders i.e., shareholders, employees and the Company. |
| Balancing Benchmarks and Context |
Focus on aligningthe employees who will steer the Company through the IPO. This typically includes:
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| Market and Investor Perception |
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Determining the right grant size is critical to ensuring your ESOP strategy supports employee engagement, aligns with your company’s long-term objectives, and maintains financial sustainability through the IPO journey and beyond.
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Disclaimer: The above content has been furnished solely for information and must not be reproduced or redistributed. It should be noted that we are not soliciting any action based upon it. Also, it does not constitute any recommendation. In particular, the information above is for general purposes only and is not an advice on employee stock option solutions valuations or preference of one scheme over another. The information given above is in summary form and does not purport to be complete. We have reviewed the above and in so far as it includes information or facts, it is believed to be reliable though its accuracy or completeness cannot be guaranteed.