How Rivigo’s ESOPs encashment is unique and trendsetting for startup ecosystem

Employees are the backbone of startups. It’s their effort, passion, and faith that matters in shaping the successful path for a company. Working in startups isn’t a cakewalk as it requires employees to don several hats (depending on stage and circumstances), face long working hours and several other hardships.

However, it’s also rewarding in a manner that no corporate incentive structure can match. Startups often offer stocks to early, core and hard working employees to let them retain actual ownership in the company.

Besides ample learning and experiencing a high growth environment, Equity Stock Option (ESOP) is the major temptation for many young talents to choose to make their careers with startups over cozy jobs offered by established corporates.

Although, the stock option has not brought fortune for many as barely 1 or 2 out of 10 startups end up creating wealth for stakeholders including employees.

High mortality rate, lack of exits and rare secondary buyouts until 2017 had wiped out the dream of many employees who were expecting to cash out ESOPs. Nevertheless, ESOPs are now exhibiting their true value as many employees across companies such as Flipkart, Paytm, Ola, Citrus Pay, Myntra, Lenskart have had made fortunes.

While Flipkart (along with Myntra plus Jabong) alone estimated to offer $500 million to several hundred employees who hold stock in the company, Paytm’s employees had cashed out over $70 million across two tranches.

Joining the league of above startups, surface logistics company Rivigo has gone through a secondary transaction where 30 employees have turned crorepatis after encashing their stock options. Former and present employees belonging to senior as well as middle management executives levels collectively made Rs 71 crore.

Ironically, about a half dozen of senior executives had resigned including CTO and business head in March. At that time, Rivigo dismissed the media reports outlining the attrition at top functions was minuscule.

Setting an example for many startup founders, Rivigo has allowed stock liquidation for employees at the same valuation it raised primary funds in January this year. Going a step ahead, the company didn’t put any cap on vesting of ESOPs and thus, allowed a number of executives to sell all their stock in a single transaction.

Although, these aspects haven’t been highlighted by the media. This is a very powerful and bold move by fairly a young company. Barely any Indian startup has let employees to cash out ESOPs at one go.

Notably, Rivigo is the first company to let its employees dilute their stock holdings in such a short time period. As many as 30 employees cashed out ESOPs and it’s been only four years since the starting of operations.

With this, Rivigo becomes an inspiration for several mid scaled companies who eventually will go through secondary transactions. Besides, such a gesture would motivate many fresh and mid-level employees to join the fledgling startups instead of corporates.

The rise in the number of secondary deals is also a sign of a matured and evolved ecosystem. Given that India has been notorious for not offering exits, such deals are providing the much-needed confidence to all stakeholders - employees, founders as well as investors.

While we don’t know the details and structure of the deal, let’s cheer up for folks at Rivigo! And, expect much more secondary events like Deepak Garg-led firm in the near future.