The transactions, which took place over the past one year, saw a number of senior as well as middle management executives at the company vest their stock options in Rivigo Services, which has emerged as one of India’s richly valued startups.
Rivigo Services cofounder Gazal Kalra said that the secondary transactions, the last of which took place in July, were not at a discount to the valuation commanded by the Gurgaon-headquartered company in its primary funding rounds.
“Over 30 employees have sold the shares, after exercising their options, in times of financial need and have benefited substantially from the life-changing wealth. Some of them have used the money to fund their children’s foreign training, while others have used it to build a house,” Kalra told ET.
The company has decided not to cap vesting of employee stock options, thereby allowing a number of executives to sell all their stock at one go, a rarity in startups that usually allow employees to sell their stock in ventures only in stages, and that too at a discount.
Rivigo Services was valued at close to $1 billion after the closure of its last fundraising round in January. The round was led by its existing backers, marquee private equity firm Warburg Pincus and sector agnostic investment firm SAIF Partners.
Although Kalra did not disclose the names of the buyers, she indicated that the shares were picked up by existing as well as new investors. However, she said, the company’s founders, including its chief executive Deepak Garg, did not buy back the stock.
The development has been cheered by industry participants, for whom exits have often been hard to come by. The transactions are also an early indicator of the growing secondary market in India, as investors rise to pick up stakes in ventures that have a proven revenue model and have emerged as leaders in their respective segments.
Employee stock options have been an important part of startup policy to attract talent, especially from the high-paying corporate world, without affecting cash flow. Esops also help ensure that employees are part of the process of building a company and are locked in for a certain period. Secondary sales by employees working in Indian startups have been on the rise in recent times.
Walmart’s $16 billion acquisition of Flipkart, India’s largest domestic eretailer, in May, is expected to see the latter’s employees earn up to $500 million in the process.
According to Kalra, the decision to structure the company’s ESOP plan was done with the desire to generate greater wealth creation. ESOPs form about 7-10% of the company’s overall shareholding.
“For us liquidity is not dependent on funding rounds… We have created dollar millionaires through ESOP sale in less than four years,” she said.
Jitendra Gupta, managing director at PayU India said, “It is important to create wealth at all levels in a startup organisation because employees take the risk by joining it, irrespective of the level. They need to be rewarded for that risk.”
Gupta, who had previously co-founded payments platform CitrusPay, sold the company to PayU in 2016 for an estimated $130 million, striking at the time one of the biggest deals in the country’s emerging financial technology sector.
That deal saw about 50 employees share the spoils, with an estimated Rs 43 crore being allocated as returns on the employee stock option plan, including an office boy, who was one of the first employees at the company, take home Rs 50 lakh.