Indian Engineers Don't Trust ESOPs. Here's Why - and What Founders Keep Getting Wrong

Short answer: not as much as founders wish they did. Longer answer: it depends on the candidate, the company stage, and — more than anything — how well you explain it.

The trust problem

Indian engineers have been burned. The last decade of startup growth in India produced a lot of ESOP grants that turned out to be worthless — companies that never went public, repriced shares during down rounds, and vesting cliffs that coincided with layoff cycles.

A 2023 survey found that over 60% of Indian engineers with ESOP grants had never been able to exercise or liquidate them. When a candidate hears "we'll give you ESOPs worth 10L," what they're actually hearing is "we'll give you a PDF that says 10L but might be worth zero."

Who values ESOPs (and who doesn't)

Engineers who value ESOPs

• Those who've seen a liquidity event firsthand

• Senior engineers (8+ years) who can afford to take a lower fixed salary for potential upside

• Those joining late-stage companies where an IPO or acquisition is plausible within 2–3 years

• Engineers with financial literacy who understand valuation and dilution

Engineers who don't value ESOPs

• Anyone under 5 years of experience (they want cash, and they're right to)

• Candidates from service companies making the switch (the salary jump alone is their upside)

• Anyone who can't afford a 10–15% reduction in fixed salary

Roughly 70% of candidates in the 0–7 year range will take a higher fixed salary over a larger ESOP grant if given the choice. At 8+ years, it shifts to about 50–50.

What founders get wrong

Mistake 1: Quoting ESOPs in rupee terms without context

"We're offering you ESOPs worth 20L" is meaningless without: at what valuation? What's the vesting schedule? What happens in a down round? When can you exercise? Is there a buyback policy?

Mistake 2: Using ESOPs to compensate for a below-market fixed salary

"Our fixed offer is 25L, but with ESOPs, the total package is 40L." Candidates see right through this. ESOPs should be on top of a competitive base, not a substitute for paying market rate.

Mistake 3: Not explaining the mechanics

I've sat in on offer calls where the founder says, "You'll get 0.1% of the company," and moves on. The same candidate, when I explain what 0.1% means at the current valuation and what it could be worth at plausible future valuations, suddenly becomes very interested.

What I recommend to founders

• Be transparent about valuation and dilution - share the current price per share and a realistic projection

• Offer a buyback policy - even limited annual buybacks signal that equity isn't just theoretical

• Keep fixed salary competitive - don't use ESOPs to plug a compensation gap

• Educate during the offer conversation - spend 15-20 minutes walking through the grant mechanics

My take

Right now, in 2026, if you're competing against a company offering 35L fixed and your offer is 28L fixed + 15L in ESOPs, you'll probably lose. Not because ESOPs are worthless. Because the candidate has rent to pay, a home loan EMI, and parents to support, and "maybe money in 4 years" doesn't help with any of that.