A S BANKA ADVISORS

“How much equity should I give my CTO?” It is a question founders bring to us at A S Banka Advisors Private Limited, and the honest answer starts with a different question: how many people will you hire before your next round, and what will each of them need? The pool and the grants follow from that plan. Below are the ranges we recommend as a starting point for Indian startups, and how to decide where your company should land inside them.

How big should your ESOP pool be?

Our recommended pool, as a share of fully diluted capital:

Size the pool to your hiring plan, not to a round number: list the roles you will hire before the next round and the grant each will need, then add a buffer for refresh grants. And expect a top-up at each priced round. Investors may ask for the pool to be topped up before they come in, so the dilution falls on existing shareholders. Model it before you sign the term sheet.

How much should each key hire get?

The earlier and riskier the stage, the larger the grant for the same role, because the shares are worth less and the risk is higher. Grant to the role, not to the negotiation: fix a band for each level so that two people in the same role are not far apart.

Vesting and exercise terms

• Four years with a one-year cliff. This is the term we recommend, and in India the law already requires at least one year between grant and vesting.
• Vest monthly or quarterly after the cliff, so that people who leave take only what they have earned.
• Choose the exit window on purpose. Tax is triggered when an employee exercises, not when they sell (eligible startups can defer the employee’s tax). A short window after leaving can force a departing employee to pay tax on shares they cannot sell. For long-serving employees, we recommend allowing exercise until a liquidity event or for a longer fixed period.
• Plan refresh grants from year two for the people you most want to keep, at about a quarter to a third of a new-hire grant for the same role, and keep room in the pool for them.

Where should your company land inside a range?

Three ESOP mistakes to avoid

1. Promising options before a plan exists. Offer letters that mention options, with no plan approved by shareholders, are a gap an investor’s diligence will find.
2. Sizing the pool by a round number. A pool set without a hiring plan either runs out before the next round or gives away ownership you did not need to.
3. A short exit window with no thought for tax. It can leave departing employees paying tax on shares they cannot sell, which turns a reward into a cost.

Get the ranges and the checklist

Download ESOP Pool Ranges for Indian Startups, our recommended pool sizes, grants and vesting terms in one guide. Once you know the numbers, the plan still has to be approved, granted, registered, taxed and, where people are outside India, reported under FEMA: our ESOP Design + Tax Checklist walks through each step in order. You can also model your ESOP pool cost with our free ESOP Cost Simulator.

Want a pool and grant plan for your team?

These ranges are a starting point, not advice for any specific company. The right pool and grants for you depend on your hiring plan, your round and your team. Book a quick call and we will size them with you.