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Startup ecosystem · ESOP

ESOP pool sizing: how much to reserve and when

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  1. Facts

    ESOP pool is a block of authorised but unissued shares reserved for employee grants. Standard pool size: 10-15% of fully diluted shares pre-Series A, 15-20% post-Series A. The pool is created before the VC invests, meaning it dilutes the founders, not the investor.

  2. Provisions and law

    • Companies Act 2013, Sec 62(1)(b) | SEBI SBEB Regulations

  3. Analysis

    Investors always ask for the pool to be created pre-investment. A VC investing at a ₹50Cr valuation wants the 10% ESOP pool already in place, so their ₹50Cr buys into a company where the dilution has already happened to the founders. Pool is authorised by a special resolution + board resolution, and the ESOP scheme must be filed with the ROC.

  4. Conclusion

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