Circles Life’s ESOP breaks new ground. But is there a trade-off?

When an ex-employee of a rapidly growing Southeast Asian unicorn was about to cash out his stock options, he noticed that the shares had been wiped from the system, even though they were supposed to be valid until 2029.

He later found that the legal fine print said employees had to exercise their options within a year of leaving the company. If not, the options would expire.

The employee claims he had not been adequately briefed about this when he was offboarded and wonders whether others have had the same experience.

Circles Life co-founder Rameez Ansar / Photo credit: Circles Life

As Southeast Asia’s startup ecosystem grows rapidly and the demand for talent shoots up, founders have turned to employee stock option plans (ESOPs) to attract talent.

Many employees, however, remain skeptical. Indonesia is seen as lacking an ESOP culture despite having the second-highest number of unicorns in the region.

Meanwhile, ex-Grab staff in Vietnam belatedly found out that the shares they held would become worthless when the company went public due to regulations, though the company did try to salvage the situation by buying back their shares.

Founders, too, are unfamiliar with the nuances of ESOPs. Also, 58% of companies that don’t run these schemes doubt that it’s the right strategy to attract and keep talent, while 51% are unsure about how to implement it, according to a 2021 study by Svested and Saison Capital entitled “State of ESOPs in Southeast Asia.”

It’s a chicken-and-egg problem: If ESOPs are poorly run and illiquid, employees won’t find them enticing. And if employees aren’t clamoring for ESOPs, startups won’t implement them.

Singapore telco Circles Life is hoping to break a vicious cycle by running an ESOP that it says is “the most generous in the region.”

“It’s not true that people here don’t value ESOPs. It’s just that we have to do a better job as a community to help other founders, employees and investors understand how ESOPs are a win-win for everyone,” says Rameez Ansar, co-founder of Circles Life, in an interview with Tech in Asia.

A key attraction for the firm is its stock buyback program, which happens roughly every 18 months and allows all employees to sell vested stocks back to the company at regular intervals.

The telco’s most recent buyback program – accessible to all employees with over a year’s tenure – was worth $5 million. Circles Life says this was one of the biggest pre-IPO liquidity events in Southeast Asia in recent times.

In the past, startup founders preferred to wait for an exit, such as an IPO or a trade sale, before implementing buyback programs.

An unusual plan

ESOP boom

But what’s the catch?