How to explain ESOP to future team members?

I often get asked the question by fellow founders “how can we best explain the value of ESOP to future employees?”

Question by a founder friend on whatsapp

Here’s a step by step guide:

1. Explain the system: In our case, the equity we grant is a percentage of the cash salary that comes on top.
2. Show the value of the equity in 3 different scenarios: a) Valuation at the upcoming round b) Valuation in 4 years c) Moonshot valuation (e.g. unicorn).
3. Explain the mechanics: Vesting, cliff and exercise window. We wrote this guide to help explain these mechanics.
4. Show them how their grant will look like in your ownership software of choice, like Ledgy ;) This helps to show that equity is not a one-off topic but that it is taken seriously and in a transparent way all along.

ledgy.com

Hope this helps and please reach out if you have any further questions!