Let’s dive into the world of ESOPs and understand when and who should consider implementing them.

Stage 1: preseed: At a pre-seed stage, founders primarily focused on gaining traction, an ESOP might not seem necessary. Key employees are often granted equity or options on an ad hoc basis.

Stage 2: Seed: At the seed stage, during your first outside financing round, investors may require an ESOP. The benefit of having an ESOP in place is that it enables seed investors to share in the dilution.

Stage 3: Early-VC: When entering the early-VC stage, typically the first true venture capital round, investors will often require an ESOP. This is also the stage where new hires will seek significant equity grants.

Stage 4: Late-VC: In the late-VC stage, your startup is flush with capital and steadily ramping up hiring. It’s crucial to have an ESOP in place, with the amount of equity granted to new hires.

Stage 5: Growth: During the growth stage, your company is aggressively pursuing expansion and hiring at a rapid pace. Here you may have exhausted most of ESOP and the remaining shares are valuable and it’s important to use them strategically.

Remember, ESOPs play a vital role in aligning incentives, retainingtalent, and building a strong company culture