Startup Culture
Employee Stock Purchase Plan
A company program allowing employees to purchase company stock at a discount, typically after IPO.
An Employee Stock Purchase Plan (ESPP) lets employees buy company shares at a discount (typically 15%) to market price through payroll deductions. ESPPs are most relevant post-IPO and serve as an additional compensation tool. Qualified ESPPs under Section 423 offer favorable tax treatment. In the venture context, ESPPs become relevant when portfolio companies go public and need to retain talent.
In Practice
After IPO, a company offers an ESPP allowing employees to contribute up to 15% of salary to purchase shares at a 15% discount to the lower of the offering or purchase period price.
Why It Matters
ESPPs become a meaningful part of employee compensation post-IPO and help retain talent during the lock-up period when employees can't sell their pre-IPO shares.
Related Concepts
Related Guides
Understanding Startup Equity and Dilution: A Complete Guide
How equity actually works, what dilution really means, and what founders take home in different exit scenarios. Real math, worked examples, no hand-waving.
The Complete Guide to Startup Fundraising
A step-by-step guide to raising capital for your startup — from deciding when to raise, to closing your round and everything between. Written for founders, by people who've seen both sides.
Newsletter
The VC Beast Brief
Join thousands of founders and investors. Every Tuesday.
VentureKit
Ready to launch your fund?