REDWOOD SHORES, Calif., Aug. 9, 2012 /PRNewswire-USNewswire/ -- The Employee Stock Option (ESO) Fund today announced the official closing of its debut fund which will deploy up to $25 million to provide funding for current and departing employees of venture-backed companies to exercise their stock options. Departing employees of venture-backed companies are often faced with the dilemma of either exercising their stock options immediately or letting the options expire worthless. The ESO Fund reduces the risk of exercising options by lending money through attractive non-recourse loans that have no payments on principal or interest until a liquidity event is reached. The ESO Fund provides these individuals a simple yet extremely powerful mechanism to claim their equity while preserving their personal capital.
The ESO Fund is founded by venture industry veterans and thought leaders Stephen Roberts, Jimmy Lackie, and Scott Chou. The fund concept was inspired by their own personal experiences serving on the Executive Boards of many startups where they observed that a significant number of departing employees were not exercising options. "We estimate that each year employees of private companies forfeit approximately $500 million in future earnings in the form of stock options that are not exercised. We can help anyone from the receptionist up to the CEO capture some of that value without them having to take a lot of risk," said Stephen Roberts, ESO Fund Managing General Partner. "The ESO Fund provides a critical and previously unmet public service for employees."
The ESO Fund is not the same as the many funds in recent years that directly purchase shares on a secondary basis. Those funds generally limit themselves to large transaction sizes and only in companies with very visible momentum. The ESO Fund founders believe there is a very large unmet market for smaller transactions to serve companies that have not yet become household names and/or employees who do not hold positions large enough to interest large private equity firms. Moreover, the lack of success in recent high-profile IPOs has made the secondary markets very cautious regarding valuations. So rather than forcing an option holder to sell out at a low valuation or net-exercising to capture only a small fraction of their shares, the ESO Fund allows them to retain the possibility of unlimited gains.
About the ESO Fund
The ESO Fund provides loans for exercising stock options. The fund bears the risk of loss instead of the option holder if the stock should become worthless. For more information, please visit esofund.com.
SOURCE ESO Fund