Deal Terms
Last updated
Quick Answer
A company benefit that allows employees to purchase company stock at a discount, typically through payroll deductions.
ESPPs let employees buy company stock at a 10-15% discount to market price, usually through regular payroll deductions over a 6-month offering period. Common at public companies and late-stage pre-IPO startups.
In Practice
The company's ESPP allowed employees to contribute up to 15% of salary to purchase stock at a 15% discount to the lower of the price at the start or end of the 6-month offering period.
Why It Matters
ESPPs are a significant wealth-building benefit that many employees overlook. The guaranteed discount plus the lookback provision can yield substantial returns.
VC Beast Take
ESPPs are free money that most employees leave on the table. At a minimum, the 15% discount on day one is better than any savings account.
ESPPs let employees buy company stock at a 10-15% discount to market price, usually through regular payroll deductions over a 6-month offering period. Common at public companies and late-stage pre-IPO startups.
Understanding Employee Stock Purchase Plan (ESPP) is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Employee Stock Purchase Plan (ESPP) falls under the deal-terms category in venture capital. This area covers concepts related to the financial and legal terms that define investment agreements.
Newsletter
Join thousands of founders and investors. Every Tuesday.
The VC Beast Brief
Master VC terminology
Get smarter about venture capital every week. Our newsletter breaks down the terms, concepts, and strategies that matter.
VentureKit
Ready to launch your fund?