As part of our effort to understand liquidity from different perspectives, we spoke to prominent names in the VC and investor communities. This session had Sunil K Goyal, MD and Fund Manager, YourNest Venture Capital, in conversation with Rulezero’s Founder, Srinivas Katta.
The discussion covered several aspects of ESOP liquidity. One of the topics discussed was “How can companies structure their ESOP policy?”
Sunil Goyal said “Every year 25% of vesting can be allowed for employees who have been with the company for 3-4 years.”
For the question “Can external financing be used for liquidity in ESOPs?“
Sunil Goyal remarked “Third-party investors can provide funds for liquidity, as long as they are offered a guarantee of return on their investment and protection from potential downrounds, while also ensuring that the company’s cash reserves are not depleted. This funding can then be used to liquidate ESOPs.”
The videos mainly cover:
- ESOPs as the best tool to attract and retain employees.
- Buyback as the fastest way of providing liquidity to founders, investors and employees.
- Use of third-party financing to fund buyback and provide liquidity to employees.
- Investment funds on the cap table bringing an element of stability to the cap table of the company.