Source: ETRetail.com, May 15, 2018
BENGALURU: As the world’s biggest ecommerce acquisition was announced at Flipkart’s Bengaluru office last week, across the town at fintech company KrazyBee, employees were suddenly interested in knowing more about its employee stock ownership plans (Esops).
With Flipkart employees landing a $500 million jackpot following the company’s acquisition by Walmart, startups are seeing enquiries pour in from their employees seeking information such as on how to value their Esops and ways to exercise their stocks.This, despite some degree of dissatisfaction within Flipkart over how much present and past employees can cash in.
“Just after the Flipkart deal, our HR got emails from several employees wanting to know how they can get Esops,” said E Madhusudan, CEO of KrazyBee. “The management was checking on the value of their stock.”
Lizzie Chapman, CEO of lending platform ZestMoney, too, has been fielding an increasing number of queries on Esops recently. Vidit Aatrey, cofounder of ecommerce company Meesho, expects his employees too will begin asking for stock options “as they see their friends getting rich.”
“While a lot of our team already has Esops several others have asked to be added to the programme. At least five employees have had this conversation with us since the Flipkart deal,” Chapman said.Furniture rental platform RentoMojo CEO Geetansh Bamania said the “Flipkart news has definitely augmented the trust over Esops and we are seeing the ecosystem talking about it and valuing it more.”
Startup industry experts see the bonanza for Flipkart employees creating a very positive story for Esops in India, in a reversal from the last two years when employee stock options had become less attractive following several shutdowns and valuation drops.
TN Hari, who heads human resources at grocery platform BigBasket, cited how after the drastic fall in valuation at Snapdeal last year, making an offer to some senior talent involved an extra push to get them to trust Esops.“Sentiment is always cyclical, whether it is about stock markets or about value of stock options in private companies,” he said. “An event like that of Jabong or Snapdeal dampens sentiment on the overall viability and value created by stock options of startups, but an event like that of the Flipkart-Walmart deal creates renewed confidence.”
There is also the infamous case of RedBus, wherein many employees were not allowed accelerated vesting of their stock options following the company’s sale to Ibibo in 2013. More recently, fintech startup TechProcess, which French company Ingenico acquired last year, was reportedly sued by some employees who were offered a lower amount per vested share than what the investors were offered.
Employee stock options have been an important part of startup policy to attract talent, especially from the high-paying corporate world, without affecting cash flow. Esops also help ensure that employees are part of the process of building a company and are locked in for a certain period. Recent share buybacks by startups were already bringing Esops back into favour.