Foodtech unicorn Swiggy has announced an organisation-wide ESOP liquidity program for the stock option holders among its employee base. The novelty of the program is in providing a transparent liquidity plan with defined timelines from vesting to liquidation.
According to Girish Menon, head of the human resources at the Bengaluru based company, the company has invited all of its ESOP holding employees to participate in its “committed liquidity events” which will take place in July 2022 and July 2023. He did not specify the basis on which cashouts will happen in case of excess demand.
The new liquidity program is likely to be valued at up to $35-40 million (Rs 260-295 crore). However, this figure will increase in line with the company’s valuation.
The announcement comes on the heels of Swiggy’s $1.25 billion fundraise led by SoftBank Vision Fund 2 and its existing backer Prosus. The company was valued at around $5.6 billion during its last financing round in July this year. At that time, Swigyy’s ESOP pool was valued around $445 million (Rs 3,300 crore) and accounted for a nearly 8.4% share of the firm’s equity.
Meanwhile, Swiggy is also gearing up for a new funding round that will seek to reach decacorn status or $10 billion valuation. According to Entrackr’s sources, it is in talks with existing and new investors to raise up to $800 million in a potential transaction. Readers might be aware that its key competitor Zomato which was listed sometime back on the domestic bourses, has a market cap that has ranged between $13 to $14 billion for a while now.
The move to offer planned, seemingly guaranteed liquidity events is a huge positive for employees at a startup of Swiggy’s size and scale. According to several startup founders, holding ESOPs in Swiggy is equivalent to cash because of the liquidation certainty.
Over the past three years, ESOP buybacks across funded and large startups have picked up which is a sign of the ecosystem having come of age. During the first six months of 2021, employees in startups had made over $100 million through buybacks and secondaries.
According to Fintrackr’s data, this is almost 2X more than what employees made in the entire 2020 through ESOPs liquidation events.
Such liquidation opportunities will instil faith in ESOPs in many startups that have scaled up enough. Many promising companies in their early growth stage will be able to use ESOPs as a genuine tool to attract and reward talent.