The ESOP Revolution: How Indian Startups Are Finally Getting Employee Equity Right

India's startup ecosystem has had a complicated relationship with ESOPs. The first generation of significant Indian startup exits produced stories of employees who had worked for below-market salaries for years in exchange for equity stakes that were ultimately diluted, restructured, or extinguished in preference waterfalls — leaving them with far less than they had expected. These stories became part of the cultural knowledge of India's startup talent market, creating scepticism about equity compensation that founders have had to overcome ever since. CXO India's conversations with CHROs at thirty growth-stage startups suggest that this is changing — and changing meaningfully. Founders who were themselves burned by poorly designed equity in their earlier careers are building programmes with explicit protections: double-trigger vesting, secondary liquidity provisions, transparent waterfall disclosures, and simplified tax structuring. Several prominent recent liquidation events have produced better outcomes for employee ESOP holders than the historical norm, and these stories are beginning to create positive reinforcement in the talent market. The implications for talent strategy are significant. Companies that invest in designing genuinely fair and transparent ESOP programmes are finding it easier to compete for senior talent against well-funded competitors — not just on the quantum of equity offered, but on the trust and credibility that a well-designed programme signals. Equally important: startups that have created liquidity for employees at intermediate points — through secondary transactions, tender offers, or pre-IPO buyback programmes — are building loyalty and engagement that purely cash-based compensation cannot replicate. The ESOP has always been a powerful talent tool; India's startup ecosystem is finally learning how to use it effectively.