Download: Equity and ESOP Planning Template
An equity and ESOP (Employee Stock Ownership Plan) strategy is critical for aligning employee incentives with long-term business goals. A well-structured equity plan rewards early contributors, attracts top talent, and reassures investors of a thoughtful dilution strategy. This template helps founders plan equity distribution, determine ESOP pool size, and establish vesting, granting, and communication frameworks to manage ownership professionally.
Cap Table Planning: Founders and Investors
Stakeholder | % Ownership (Pre-ESOP) | % Ownership (Post-ESOP Allocation) | Comments |
Founder 1 | 60% | 54% | CEO & Vision Holder |
Founder 2 | 30% | 27% | CTO – Product Builder |
Angel Investor(s) | 10% | 9% | Pre-seed Investment |
ESOP Pool (Reserved) | 0% | 10% | For employees, advisors, etc. |
Total | 100% | 100% |
|
Recommended ESOP Pool Sizing by Stage
Funding Stage | Typical ESOP Pool (%) | Purpose |
Bootstrapped | 5–7% | Key hires, advisors |
Seed | 10–15% | Early engineers, product, growth teams |
Series A | 12–15% | CXOs, senior hires |
Series B+ | 8–12% | Retention and expansion of talent |
ESOP Design Elements
Element | Recommended Structure |
Vesting Schedule | 4 years with 1-year cliff (25% after 12 months, then monthly/quarterly thereafter) |
Grant Type | Options with fair market value exercise price |
Exercise Window | 10 years (or shorter if employee exits) |
Accelerated Vesting | Consider single/double trigger only in acquisition or termination with cause scenarios |
Termination Clause | Unvested options are forfeited; vested options exercisable for X days post-exit |
Sample ESOP Allocation Table
Role | % of Total Equity | Type | Notes |
Early Engineer (Core) | 0.5%–1.0% | Stock Options | High impact, early team member |
Growth Lead | 0.3% – 0.7% | Stock Options | Revenue-driving position |
Senior Developer | 0.2%–0.5% | Stock Options | Depends on seniority and contribution |
Advisor | 0.25%–0.75% | Equity Grant | Often subject to 2-year vesting, quarterly |
CXO (Non-founder) | 1.5% – 3.0% | Stock Options | Depending on the title, stage, and role responsibility |
ESOP Grant Communication Template
Item to Communicate | Included in the Offer Letter? | Explained in a 1:1 Discussion? |
Total options granted | ☐ | ☐ |
Exercise price and fair market value | ☐ | ☐ |
Vesting schedule | ☐ | ☐ |
Tax implications and timing of exercise | ☐ | ☐ |
Exit liquidity assumptions (if any) | ☐ | ☐ |
Equity Communication for Founders and Investors
- Clearly define pre- and post-ESOP ownership in your pitch decks and cap table.
- Highlight how the ESOP pool enables retention and long-term commitment.
- Ensure investors agree to refresh or top up ESOP post-funding, if needed.
- Always seek legal and financial guidance when structuring your ESOP agreement or trust.
Final Setup Checklist
Step | Status |
Drafted or updated cap table | ☐ |
Created ESOP policy document | ☐ |
Legal approval from the board/founders | ☐ |
ESOP pool reserved and included in the cap table | ☐ |
The ESOP plan was communicated to the current team | ☐ |
Offer letters include equity grant language | ☐ |
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