In order to finance its business model of lending to workers of high-growth startups to exercise vested ESOPs, financial services company ESOPDhan is looking to obtain structured financing in the upcoming weeks. Shravan Shroff and Nitin Agarwal, the start-founders, up’s have so far supported it with stock.
Once its present corpus is exhausted, ESOPDhan plans to pursue obtaining structured financing from investors and big family offices.
It has provided a Rs 20 crore loan to 15 workers of two US-based software businesses that are headquartered in Bengaluru and Hyderabad. It aspires to sign comparable agreements with 10–12 other businesses in the upcoming year.
The company claims that because it concentrates on unicorns and accounts for exit timetables of at least two years, its business model is “cushioned” against market volatility.
“At present, our funding is primarily through the infusion of equity as founders, and later on we will fund it from structured debt,” Agarwal told as per reports.
Among Agarwal’s notable investments are Wow!, Exotel, FarEye Technologies, Oyo Rooms, and Wow! Momos, Vista Rooms, Sugar Cosmetics, Vahdam Tea, Aarav Unmanned Systems (AUS), Karza Technologies, and Uniphore.
Oyo Rooms, Get My Parking, FarEye Technologies, Vista Rooms, Uniphore, Exotel, Aarav Unmanned Systems (AUS), Zip Dial, Karza Technologies, Rubix Data Sciences, and Earth Rhythm are only a few of Shroff’s personal investments.
The two invested Rs 30 crore in the creation of ESOPDhan, of which roughly Rs 20 crore has been loaned. The plan is to use up all the money that is on hand before turning to structured debt to generate further funding for the company’s operations.
“We are not worried about the funding because we are sure we will be able to raise more funds as and when required… We will start raising structured debt in about four weeks,” Agarwal said but did not specify the exact quantum of debt.
The corporation prefers structured debt since the reimbursements to lenders will be organized as and when ESOPs are liquidated, according to Agarwal.
By 2025, ESOPDhan hopes to have a loan book of Rs 500 crore, enabling it to assist more people in purchasing the stock options that their companies are providing.
Employees occasionally find it challenging to join ESOPs soon after vesting because they lack the finances to cover the vesting price and income tax.
ESOPDhan has been trying to help employees with this issue while also promoting a positive employer-employee relationship. Employees may benefit from lower taxes on stock sales by exercising their stock options early, which is an alluring offer, he added.
The business claims that there is a significant unmet need because the vested ESOPs of Unicorns in India total more than USD 10 billion.
“As far as demand is concerned, we are not worried,” he said.
The business will maintain a laser-like focus and solely finance ESOPs by unicorns in the face of macro uncertainties that are shaking the market and the startup ecosystem (with the USD 1 billion valuation and above).
Focusing on unicorns gives ESOPDhan the assurance of an “easy exit” from such financing at some point in the future via the IPO option.
ESOPDhan, a non-banking financing firm authorized by the Reserve Bank of India, uses unique technologies to decide which projects to support.
The startup began with ESOPDhan sponsoring 5 India-based workers of Harness, a company with a US $3.7 billion value whose platform aids businesses in accelerating their Cloud ambitions and quickening the release of software improvements.