Startups
ESOP is primarily popular in startups, as it increases employee engagement (including among specialists) while not requiring the company to allocate significant financial resources for high salaries. It is worth noting that startups typically do not have substantial budgets to pay highly qualified personnel. Allowing a program participant to financially link their interests with the company’s profits and valuation effectively constitutes a form of remuneration. An employee who receives the opportunity to acquire a portion of the enterprise becomes much more invested in the company’s growth, knowing that tangible benefits await.
Technology Companies – Their Value Grows with the Efficiency and Quality of the Technology Offered
The development of a specific technology or product within a company is usually strongly dependent on the amount and quality of work delivered by the company’s employees. The more they feel that the development of said technology or product contributes to increasing the value of the company’s shares — including those they own — the more seriously they will approach their work.
Therefore, ESOP also works well in technology-oriented companies, where the company’s growth (especially of a specific technology or product) largely depends on the determination and motivation of its employees.
SPVs Established for the Execution of a Specific Project
There are companies on the market that were created specifically to carry out a particular project, aimed at its subsequent sale to a strategic or financial investor or rapid commercialization.
Such entities are ideal candidates for implementing ESOP-based programs — the faster and more effectively employees achieve the desired outcome, the greater their financial reward through the realization of participation rights.
Companies Where the Pace of Product or Service Development and Commercialization Depends on Team Engagement
The issue of insufficient engagement — or even the inability to attract employees from the market who must contribute intellectual property and know-how to grow the company’s value — affects many other companies across various industries.
One solution to this problem is precisely ESOP — a dedicated incentive program that grants the team a stake in the business, helping build a long-term relationship with employees. In this case, ESOP is designed so that employee expectations align with the plans of the company’s shareholders.
