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Why we rewarded our employees with a $15m ESOP liquidation

PUBLISHED ON : August 12, 2021

BY Aman Singh Malik

At Nium, we’re shaking up the system and transforming the face of global payments. It’s a big job – and to get it done, we need the very best talent on our team.

Nium is nothing without its people. They drive our growth, and in return, we believe that they should have a stake in our success. That’s why we offer Employee Stock Options (ESOPs) to some of our staff. ESOPs give employees the opportunity to become part-owners of the company and reap the rewards as we reach new heights.

We recently hit a massive milestone, reaching unicorn status thanks to a $200m fundraise. In recognition of that achievement, we wanted to give back to our employees and organised Nium’s inaugural ESOP liquidation event, to the tune of $15m. Liquidating ESOPs delivers tangible and outsized value to the asset that’s most valuable to us: our people. This puts us in a stronger position than ever to fuel our next phase of growth.

What are ESOPs?

ESOPs are share options that businesses offer their employees, giving them the right to buy those shares for a predetermined price, in the future.

Shares are essentially units of ownership. Think about it like building a house. A house is made up of bricks, and all those bricks are equal in size and value. When employees join the company, we give them the right to buy their brick for $10 whenever we sell the house. It doesn’t matter if by then, the house value has increased dramatically, and now that brick is worth $10,000. They can still buy it for $10 and own a little bit of the house.

Thanks to the enormous potential scalability of successful startups, ESOPs can be incredibly lucrative. The value of ESOPs can skyrocket rapidly, offering a rate of return that far outstrips any other type of investment – maybe even crypto.

One of the best things about ESOPs is that because employees part-own the business, they’re (literally) invested in its success, more aligned around its vision and committed to collaborating and innovating to achieve it. The better the team performs, the better the business performs; the better the business performs, the better off everyone is. 

How we use ESOPs at Nium

At Nium, we’ve been offering ESOPs to some of our staff since 2017. In the normal course, ESOPs turn liquid when the company goes for an IPO. However, in our case, 4 years after ESOPs were introduced and following the achievement of the coveted “unicorn” status (even without an IPO), we thought it was time to convert some of that promise into dollars in the bank. 

In our $15m liquidation event, we offered those employees with ESOPs the opportunity to exercise a certain percentage of their vested ESOPs. Since the time we first started issuing ESOPs, the value of the ESOPs has grown by 2000%. Talk about a good investment! For some, the sale resulted in cash outs even higher than their annual salary! And they still have some ESOPs left over, which should continue to grow in value and drive even greater returns in the future. 

In fact in Nium’s case, we gave our employees some ESOPs in 2020 in the most extra of times as well. The story behind this is that when the pandemic hit, we, like most other businesses, took a financial hit and had to take the hard decision to implement salary cuts for all our staff. It was a huge sacrifice for them during a very difficult time, and in recognition of that sacrifice, we awarded every employee with ESOPs worth twice the value of their salary cut. If someone took a $1,000 pay cut, for instance, they were given $2,000 worth of ESOPs.

Luckily, we were able to fully reverse the salary cuts within four months. Even better, our people continue to reap the benefits of the ESOPs they were granted in lieu. The liquidation event came exactly a year after the cuts and in that time, the value of the ESOPs had increased 3x – so everyone saw supernormal returns for their sacrifice. Tellingly, not all those eligible chose to participate in the liquidation event, citing their belief that Nium will reach even greater heights, and the ESOPs they currently hold will deliver even greater value further down the line.

Following this fundraise, our ESOP Pool is now worth 25% of our overall cap-table – meaning a quarter of Nium’s value belongs to our colleagues. Having held the event and converted some of the notional value of ESOPs into real cash returns, our team is more motivated and invigorated than ever before, and ready to fuel our next stage of growth.

Nium is the element that makes Fintech go, and our people are the element that powers our mission. If you believe in what we’re doing and want to join us on our growth journey, check out our open roles.