The Employee Stock Option Fund was formed by Stephen Roberts, Jimmy Lackie, and Scott Chou in 2012 and manages over $200 million. The ESO Fund founders and team members have extensive experience in venture capital, private equity, and operations at entrepreneurial companies. ESO has developed a flexible due diligence strategy and transaction protocol to rapidly evaluate and close transactions.
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. This decision can be especially complex given the high failure rate and the long holding periods for startup companies. Who knows what can go wrong down the line? Moreover, some employees will face Alternative Minimum Tax (AMT) requirements as the result of exercising stock options which can create additional financial distress. Despite the government’s desire to protect small investors, nearly every startup company operates without regard to Rule 701 Disclosures which causes option holders to take enormous financial risks without the benefit of any information.
The ESO Fund takes the risk out of exercising options. The Fund gives holders of options in select venture backed companies the possibility of future upside by providing the cash required to exercise their options and pay the associated taxes. If the stock becomes valueless, the Fund, not the employee, bears the loss. Individuals who have already exercised can obtain similar benefits under the same non-recourse terms.