Zero to Infinity 22: Structuring incentive plans – ESOP, Cash and Balanced Scorecard
Jul 9, 2019
Avnish Bajaj, Founder & MD of Matrix Partners India, offers insightful strategies for structuring employee incentive plans crucial for early-stage startups. He discusses the balance between ESOPs and cash, providing thumb rules for determining equity at various stages. The conversation dives into the creation of effective ESOPs, emphasizing the importance of equity valuation and aligning performance indicators with compensation. Bajaj also shares industry examples, making complex concepts accessible and practical for motivated teams.
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Baazi's Office Boy and ESOPs
- Avnish Bajaj recounts how even the office boy at Baazi benefited significantly from ESOPs after the company's exit.
- This highlights the wealth creation potential of ESOPs and their changing perception.
Equity as a Multiple of CTC
- Consider equity as a multiple of CTC (Cost To Company), especially beyond the co-founder stage.
- A multiple of 1-5x CTC in stock options, vesting over four years, is a good benchmark.
Equity for Senior Hires
- For more senior hires, the equity multiple increases, while co-founder level positions warrant a percentage of the company.
- This model incentivizes employees with significant potential upside as the company grows.
