🚀 𝗨𝗻𝗹𝗼𝗰𝗸𝗶𝗻𝗴 𝘁𝗵𝗲 𝗣𝗼𝘄𝗲𝗿 𝗼𝗳 𝗘𝗦𝗢𝗣𝘀: 𝗗𝗲𝘁𝗲𝗿𝗺𝗶𝗻𝗶𝗻𝗴 𝘁𝗵𝗲 𝗘𝘅𝗲𝗿𝗰𝗶𝘀𝗲 𝗣𝗿𝗶𝗰𝗲 𝗼𝗳 𝗦𝘁𝗼𝗰𝗸 𝗢𝗽𝘁𝗶𝗼𝗻𝘀 🚀

Determining the exercise price of stock options is a crucial decision for both startups and their employees. The exercise price, or strike price, is the amount employees pay to purchase their vested options. Here’s a quick breakdown to help you understand this better:

🔍 What’s an Exercise Price?
The exercise price is set by the company and can range from a nominal amount (like INR 10) to an amount based on the last round of valuation. This price impacts how much employees will pay to exercise their Employee Stock Option Plans (ESOPs).

💡 Why a Nominal Exercise Price?
We recommend setting the exercise price at a nominal value. Here’s why:

Employee-Friendly: Lower exercise prices mean employees pay less out of pocket to exercise their options.
Independent of Valuation: Protects employees from market fluctuations. If the company’s valuation drops, employees won’t lose money.

📊 Real-World Example:
Imagine an employee granted 100 ESOPs with an exercise price of INR 70, while the current valuation price is INR 65. They’d face a loss of INR 5 per share. However, if the exercise price were a nominal INR 10, the employee would still gain despite the decreased valuation.

Ensuring a fair and strategic exercise price can make ESOPs a win-win for everyone. Let’s build financial success together!